PROJECT

THE EFFECT OF INNOVATION SUBSIDIES IN PERU

Researcher: David Alfaro Serrano, PhD Student in Economics

The existing evidence of the impact of innovation subsidies is focused on developed countries. The goal of this project is to generate quasi-experimental evidence of the direct and indirect effects of two interventions that subsidize innovation projects in Peruvian firms: the funding contest for Productive Innovation Projects in Individual Firms (PIPEI) and the Contest for Quality Improvement (CMCEI).  To carry out the analysis, the project will exploit the characteristics of the subsidy assignment mechanism to implement a regression discontinuity design. Firms who apply to the program, submit a proposal that is evaluated by experts who assign scores between 0 and 100 points based on four criteria, but only projects with a final score of 70 points or above get the subsidy. Using a combination of administrative and survey data, the projects aims to understand the effects of the interventions on firm performance (sales, employment, exports and imports) as well as on the probability of adopting new products and practices.