Assessing the economy-wide impacts of public R&D support options based on a computable general equilibrium model: focusing on types of fiscal incentives and beneficiaries

Abstract

ABSTRACT This study conducted quantitative comparisons of various public R&D support options using a CGE model. The analysis considered four different options by varying the types of fiscal incentives and the scope of beneficiaries concerning the firm size. The findings indicate that direct subsidy is more effective in spurring private R&D investments than indirect tax incentives. In addition, selective R&D support toward small and medium enterprises is found to induce balanced growth among industries. In summary, the simulation results suggest that R&D support under the direct subsidy scheme aimed at SMEs has the potential to achieve a higher equilibrium state within the Korean economy. This study confirms that the government should carefully design the R&D promotion policy by ensuring that direct R&D inducement effects are transmitted to industrial output growth with a diversified industrial structure and higher knowledge spillover effects.