Wage effects of R&D tax incentives:Evidence from the Netherlands

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Wage effects of R&D tax incentives:Evidence from the Netherlands

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Lokshin, Boris () (UNU-MERIT)
Mohnen, Pierre () (UNU-MERIT)

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Abstract

This paper examines the impact of the Dutch R&D tax incentives program, known as WBSO, on the wages of R&D workers. In our model these wages are partly determined by the governments WBSO tax disbursements. We construct detailed firm- and time specific R&D tax credit rates as a function of the R&D tax incentives scheme to capture the wage effects of the government R&D support. An instrumentalvariables econometric model is estimated using an unbalanced firm-level panel data covering the period 1996-2004. After controlling for firm and industry effects and business cycle fluctuations, R&D tax incentives are found to increase R&D wages. The R&D wage effect of these incentives is smaller than their effect on real R&D investment, but it is still sizeable. The elasticity of the R&D wage with respect to the fraction of the wage supported by the WBSO scheme is estimated at 0.1.

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Paper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 034.

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Date of creation: 2008
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Handle: RePEc:dgr:unumer:2008034

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Find related papers by JEL classification:
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-06-07 (All new papers)
NEP-IPR-2008-06-07 (Intellectual Property Rights)
NEP-LAB-2008-06-07 (Labour Economics)
NEP-MIC-2008-06-07 (Microeconomics)
NEP-PBE-2008-06-07 (Public Economics)

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