State Aid, R&D, and the Digital Content of Trade


Chiara Castelli, Dario Guarascio, Stefan Jestl and Robert Stehrer

wiiw Working Paper No. 237, November 2023
19 pages including 7 Tables and 1 Figure

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We test for the role of state aid as a driver of digital competitiveness at the industry level, focusing on the digital factor content of trade. Results show that state aid may increase digital competitiveness, particularly in R&D-intensive industries and in relation to the export of (digital) capital-intensive goods and services. Interestingly, aggregate state aid appears to be more effective than specific R&D funds in explaining the performance of country-industries in foreign markets.


Keywords: Factor content of trade, ICT capital, state aid, sectoral R&D capability

JEL classification: F14, O30

Countries covered: European Union

Research Areas: International Trade, Competitiveness and FDI