Macroeconomic, intersectoral, and environmental effects of R&D subsidies in Chile: An input-output approach

The present study simulates subsidies to the R&D in Chile with an intersectoral approach known as the Leontief price model. For this, it has been used information from the Input-Output Tables (IOT), R&D expenditures at the sector level collected from the Survey of R&D Expenditure and Research Personnel, and labor market data available from the National Socioeconomic Characterization Survey. Thus, the official IOT data are broken down into new sectors to represent monetary transactions carried out by the R&D sector. Then, it is possible to obtain changes on macroeconomic, intersectoral, and environmental variables for different subsidy rates throughout the simulations performed with the model. The results show that an increase in R&D subsidies reduces the prices slightly and increases production, employment, and emissions at the sectoral level. Additionally, it is determined that the fiscal expenditure required to finance this subsidy is greater than the stimulus on national production. Finally, it can be concluded that the positive effects appear to be more relevant than negative impacts, so it is recommended to increase the rate of R&D subsidy in the country according to the availability of fiscal resources.