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Measuring the Effectiveness of R&D tax credits in the Netherlands

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  • Boris Lokshin
  • Pierre Mohnen

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Abstract

This paper examines the impact of the Dutch R&D fiscal incentive program, known as WBSO, on R&D capital formation. Taking a factor-demand approach we measure the elasticity of firm R&D capital accumulation to its user cost. An econometric model is estimated using a rich unbalanced panel covering the period 1996-2004 with firm-specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we examine the impact of the R&D incentive program. We find evidence that the program of R&D incentives in the Netherlands has been effective in reducing the user cost of R&D and in stimulating firms’ investment in R&D. Cette étude analyse l’effet du programme d’incitations fiscales à la recherche aux Pays-Bas, connu sous le nom de WBSO, sur la formation du capital de recherche. À partir d’une approche de demande de facteurs de production, nous mesurons l’élasticité du stock de capital de recherche au coût d’usage de la recherche. L’estimation économétrique se base sur un panel d’entreprises non-cylindré, couvrant la période 1996-2004, avec des coûts d’usage de la recherche variables. Nous trouvons que les incitations fiscales à la recherche ont effectivement baissé le coût d’usage de la recherche et ainsi stimulé les investissements en recherche et développement aux Pays-Bas.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2007s-29.

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Date of creation: 01 Dec 2007
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Handle: RePEc:cir:cirwor:2007s-29

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Keywords: R&D tax credits; panel data; crowding out; user-cost elasticity.; crédit d’impôt à la recherche; données panel; coût d’usage à la recherche; crowding-out.;

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References

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  1. Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
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  6. Himmelberg, Charles P & Petersen, Bruce C, 1994. "R&D and Internal Finance: A Panel Study of Small Firms in High-Tech Industries," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 38-51, February.
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  8. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
  9. Marcel Dagenais & Pierre Mohnen & Pierre Therrien, 1996. "Les firmes canadiennes répondent-elles aux incitations fiscales à la recherche-développement? (rapport final)," CIRANO Project Reports 1996rp-03, CIRANO.
  10. Bronwyn Hall, 1994. "R&D Tax Policy During the Eighties: Success or Failure?," NBER Working Papers 4240, National Bureau of Economic Research, Inc.
  11. George Van Leeuwen & Luuk Klomp, 2006. "On the contribution of innovation to multi-factor productivity growth," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 367-390.
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  13. Jeffrey I. Bernstein, 1986. "The Effect of Direct and Indirect Tax Incentives on Canadian Industrial R&D Expenditures," Canadian Public Policy, University of Toronto Press, vol. 12(3), pages 438-448, September.
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Cited by:
  1. Baghana, Rufin & Mohnen, Pierre, 2009. "Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Quebec," MERIT Working Papers 001, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. repec:dgr:unumer:2008006 is not listed on IDEAS
  3. Lokshin, Boris & Mohnen, Pierre, 2013. "Do R&D tax incentives lead to higher wages for R&D workers? Evidence from The Netherlands," Research Policy, Elsevier, vol. 42(3), pages 823-830.
  4. Sybrand Schim van der Loeff & Pierre Mohnen & Franz Palm & Amaresh K. Tiwari, 2008. "Financial Constraints and other Obstacles: Are they a Threat to Innovation Activity?," CESifo Working Paper Series 2204, CESifo Group Munich.
  5. Pierre Mohnen & Boris Lokshin, 2009. "What Does it Take for an R&D Tax Incentive Policy to Be Effective?," CIRANO Working Papers 2009s-11, CIRANO.
  6. Michel Dumont, 2012. "Working Paper 08-12 - Impact des subventions et des incitations fiscales sur la recherche et le développement des entreprises en Belgique (2001-2009)
    [Working Paper 08-12 - De impact van subsidies
    ," Working Papers 1208, Federal Planning Bureau, Belgium.
  7. Erik Stam & Karl Wennberg, 2009. "The role of R&D in new firm growth," Jena Economic Research Papers 2009-004, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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