A dose-response evaluation of a regional R&D subsidies policy

This paper evaluates the effects of a regional R&D policy in the Italian province of Trento from 2002 to 2007, an ideal testing ground for the role of local government and the effectiveness of an R&D place-based policy. Exploiting a unique database and using a counterfactual dose-response regression model, we perform an evaluation exercise of policy targets concerning employment, fixed and intangible assets. We find that two years after the award date, there exists an inverted u-shaped relationship between subsidies intensity and impact size: there exists a range of subsidy doses that is effective in stimulating employment and intangible assets growth. Instead, we do not find any additionality of the policy on fixed assets. At longer time span, i.e. four years after the award, the effect on employment growth persists and we do observe a mild effect on labor quality for intermediate grants spending. Moreover, the effect on intangible assets spending growth is also persistent for a similar interval of R&D subsidies amounts. We discuss the impact deriving some policy considerations.