Economic activity tends to cluster. This results in productivity gains. For policy makers this offers an opportunity to formulate and promote policies that foster clustering of economic activity. Paradoxically, although agglomeration rents are often found in empirical research a rationale for...

In this paper, we investigate the use of interactive effect or linear factor models in regional policy evaluation. We contrast treatment effect estimates obtained by Bai (2009)'s least squares method with the popular difference in differences estimates as well as with estimates obtained using...

We quantify general equilibrium effects of place-based policies in a multi-region framework with mobility, trade and agglomeration economies. Using detailed data on EU transfers, we infer the local effects of different transfer types on productivity, income and transportation cost. Based on...

This paper proposes a model where heterogeneous firms choose whether to undertake R&D or not. Innovative firms are more productive, have larger investment opportunities and lower own funds for necessary tangible continuation investments than non-innovating firms. As a result, they are...

In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such policies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project...

We investigate conditions that aggravate market failures in energy innovations, and suggest optimal policy instruments to address them. Using an intertemporal general equilibrium model we show that “small” market imperfections may trigger a several decades lasting dominance of an incumbent...

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and...

Using a natural experiment from Germany, we show that temporary place-based subsidies generate persistent effects on economic density. We identify employment and capital formation as main channels for higher income per square kilometer. As the spatial regression discontinuity design allows us to...

The additionality principle says that the funds of the European Union should not replace, but be an addition to national regional policy funds. The benchmark for the co-funding is that the EU bears 50% of total costs associated with regional projects eligible for EU support. In some regions,...

China's growth strategy as set out in the 11th 5-year plan in 2005 called for upgrading of product quality, the development of an innovation society, and reduced reliance on foreign intellectual property with high license fees. Consistent with this policy, China has been involved in recent years...