Template-Type: ReDIF-Paper 1.0

Author-Name: Robin Kleer
Author-X-Name-First: Robin
Author-X-Name-Last: Kleer

Title: Government R&D Subsidies as a Signal for Private Investors
	
Abstract: Government subsidies for R&D are intended to promote projects with high
returns to society but too little private returns to be beneficial for private investors.
This may be caused by spillovers or a low appropriability rate. Apart from the
direct funding of these projects, government grants may serve as a signal for good
investments for private investors. We use a simple signaling model with different
types of R&D projects to capture this phenomenon. In a setup where the subsidy
can only be used to distinguish between high and low risk projects, government
agency’s signal is not very helpful for banks. However, if the subsidy is accompanied
by a quality signal, it can lead to increased or better selected private investments.
Length:  21 pages
Creation-Date:  2008-11
File-URL: http://www.bgpe.de/texte/DP/066_kleer.pdf
File-Format: Application/pdf
File-Function: First version, 2008
Number: 066
Classification-JEL: D82, G28, H20, O33, O38
Keywords: Subsidies, Innovation, Asymmetric Information, Signaling
Handle: RePEc:bav:wpaper:066_kleer