Bang for the Buck: Aggregate Impact of Firm-Level R&D Incentives
Abstract: Firm-level research and development (R&D) incentives, such as subsidies and tax credits, are popular tools aimed at raising aggregate growth. We propose an empirical framework quantifying the aggregate impact of such firm-level R&D incentives. Our methodology -- grounded in modern endogenous growth theory -- can be applied with commonly available data and without solving a full structural model. Using firm-level data from more than 100 countries, our estimates suggest that large firms are the strongest contributors to policy-induced increases in aggregate growth. However, subsidizing young, fast-growing firms (gazelles) can deliver the same bang for less than half the cost.