Working Paper No. 832

Subsidizing Away Exports? A Note on R&D-policy towards Multinational Firms

Published: May 19, 2010Pages: 29Keywords: Multinational Firms; R&D; Subsidies; Location; Empirical AnalysesJEL-codes: L13; F23; O33

Subsidizing Away Exports? A Note on R&D-policy towards Multinational Firms Pehr-Johan Norbäck


In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.

Pehr-Johan Norbäck

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