Impacts of the Brazilian Science and Technology Sector Funds on industrial firms’ R&D inputs and outputs: New perspectives using a dose-response function

This study aims to assess the impact of Brazilian Sector Funds from the standpoint of the amount of resources provided to industrial companies between 2001 and 2006. We evaluate the impact of government investment on firms’ indicators of technological efforts and outcomes (size and high-technology exports). To this end, we use a technique that evaluates private investments’ response to different amounts of public incentive, using the generalized propensity score. This is the first study in Brazil that uses a continuous treatment technique to assess the impact of public incentives for innovation. Estimates for the average effects indicate that, compared to those which have not received incentives, if the government had increased the resources provided by Sector Funds by 1%, firms would have increased their R&D investments by 1.5% in the year that they received those resources and 1.8% four years after access. Furthermore, the impacts of the Sector Funds on treatment level indicate a quadratic “U”-shaped relationship, suggesting that these resources have more impact on the extremes of the distribution, that is, they have stronger relative impact for very small firms and for medium-sized or large firms. All of these results allow us to reject the crowding-out hypothesis.

In 40 Encontro de Economia, ANPEC.