Economics of Finnish Innovation Policy

Abstract

We provide both a qualitative analysis of the various Finnish innovation policies and a quantitative welfare analysis of the Finnish R&D subsidy policy and tax credit regime of 2013-2014. In the qualitative analysis we argue that innovation policy should be based on a bottom-up approach rather than a mission oriented, top-down approach. We highlight areas of the Finnish innovation policies that should be evaluated rigorously. Our counterfactual welfare analysis suggests that the Finnish R&D subsidy and tax credit policies increase R&D investments and social externalities markedly, but once the costs of the policies are taken into account, they hardly increase welfare.