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Are Complementary Policies Substitutes? Evidence from R&D Subsidies in the United Kingdom

Jacquelyn Pless

American Economic Journal: Economic Policy2026https://doi.org/10.1257/pol.20220356article
AJG 3ABDC A*
Weight
0.37

Abstract

This paper studies whether grants and tax incentives for private R&D are complements or substitutes. I use multiple quasi-experimental research designs to examine firms in the United Kingdom and find that increasing tax credit generosity substantially enhances the effect of grant funding on R&D for small firms, suggesting that the instruments are complements. Financial constraints are likely at play. The effects are strongest for firms that appear constrained, and the combination of policies increases R&D “entry.” Furthermore, I find that the instruments are substitutes for larger firms, which are usually less constrained. Some alternative explanations can be ruled out. (JEL D22, H25, H81, L25, O31, O38)

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https://doi.org/https://doi.org/10.1257/pol.20220356

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@article{jacquelyn2026,
  title        = {{Are Complementary Policies Substitutes? Evidence from R&D Subsidies in the United Kingdom}},
  author       = {Jacquelyn Pless},
  journal      = {American Economic Journal: Economic Policy},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1257/pol.20220356},
}

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Are Complementary Policies Substitutes? Evidence from R&D Subsidies in the United Kingdom

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.