Data and Code for: Government Financing of R&D: A mechanism Design Approach".

We study the optimal design of government R&D loans for risky projects with positive externalities. With adverse selection, the optimal contract involves a high interest rate with zero co-financing by the entrepreneur. This contrasts sharply with observed programs. With adverse selection and moral hazard, with two effort levels by the entrepreneur, the optimal policy is a menu of at most two contracts, one with high interest rate and zero self-financing, and a second with low interest and maximum feasible co-financing. Calibrated simulations compare welfare gains from the optimal contract, observed schemes and a direct subsidy to private venture capital firms.