The Effects of BNDES on Brazilian Pharmaceutical Firms’ Innovation Investments: a Panel Data Approach * Luciano Machado Ricardo Martini Vitor Pimentel † July, 2019 Abstract This paper empirically evaluates the effects of BNDES Profarma on Brazil- ian pharmaceutical firms, estimating the quantitative effect on its main ob- jective, the expansion of innovative efforts. More specifically, it is of special interest to verify whether supported companies invested more in internal R&D than comparable non-supported ones. The present study combines firm-level data from the Brazilian Innovation Survey with BNDES Profarma loans information for the 2004-2014 period. Using Fixed Effects regression, we found Profarma’s supported firms increased internal R&D expenditures by up to 76% and total innovation expenditures by up to 59%. JEL classification : D04; O31 Keywords : BNDES; Innovation; Panel Data; Pharmaceutical, Brazil * Working paper circulated for discussion and comment purposes. The views expressed in this work are those of the authors and do not necessarily reflect those of the Brazilian Development Bank (BNDES) or its members. † The authors are economists at BNDES. Corresponding authors, respectively: lmachado@bndes.gov.br; ricardo.martini@bndes.gov.br and vitor.pimentel@bndes.gov.br. The authors would especially like to thank all those who collaborated with comments to this work, such as Antonio Marcos Ambr´ ozio, Catarina Coelho, Carla Reis, Jo˜ao Paulo Pieroni, and Victor Pina Dias, all from BNDES. The authors would also like to thank Flavio Peixoto and Carlos Lessa, from the Brazilian Institute of Geography and Statistics (IBGE).