Journal de l'économie mondiale

The Variable Impact of Central and Local Subsidies on Businesses′ Innovation

Abstract

Daniel Armeanu

The Chinese government has been able to increase its investment in R&D because to four decades of tremendous economic expansion. In terms of absolute spending, China is the world's second-biggest investor in food and agricultural research, and the greatest investor when measured in terms of purchasing power parity. This study examines the diverse effects of central subsidies and local subsidies using a special panel dataset gathered in 2019 in China's seed firm using fixed effect models. This study specifically examines whether government incentives encourage innovation among businesses. The study then clarifies whether local vs central subsidies have different effects. According to the estimation results, central subsidies have a favourable impact on a company's innovation, whereas local subsidies have a negative impact.