The effects of public subsidies in supporting private innovative activity is subject to longstanding political and scientific debates. Since the empirical findings remain largely inconclusive, this study adds to this debate with counterfactual evidence from a laboratory experiment. In a creative...

This paper extends the firm heterogeneity model of Melitz (2003) by introducing a new concept of endegenous investments in process R&D. The novelty is that if a firm invests more R&D its expected innovation return hazard rate stochastically dominates the return of less R&D investments. Due to...

The effects of public subsidies in supporting innovative activity is subject to long-standing debates. Since empirical findings remain largely inconclusive, this study adds to this debate with counterfactual evidence from a laboratory experiment. In a creative real effort task simulating the...