How effective are level-based R&D tax credits? Evidence from the Netherlands
AbstractThis paper examines the impact of the R&D fiscal incentive program on R&D by Dutch firms. Taking a factor-demand approach we measure the elasticity of firm R&D capital accumulation to its user cost. Econometric models are estimated using a rich unbalanced panel of firm data covering the period 1996-2004 with firm-specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we perform a cost-benefit analysis of the R&D incentive program. We find some evidence of additionality suggesting that the level-based program of R&D incentives in the Netherlands is effective in stimulating firms' investment in R&D. However, the hypothesis of crowding out can be rejected only for small firms. The analysis also indicates that the level-based nature of the fiscal incentive scheme leads to a substantial social dead-weight loss.
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Bibliographic InfoPaper 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 040.
Date of creation: 2010
Date of revision:
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Web page: http://www.merit.unu.edu
R&D tax credits; panel data; crowding out; user-cost elasticity;
Other versions of this item:
- Boris Lokshin & Pierre Mohnen, 2012. "How effective are level-based R&D tax credits? Evidence from the Netherlands," Applied Economics, Taylor and Francis Journals, vol. 44(12), pages 1527-1538, April.
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-BEC-2010-09-25 (Business Economics)
- NEP-ENE-2010-09-25 (Energy Economics)
- NEP-INO-2010-09-25 (Innovation)
- NEP-PBE-2010-09-25 (Public Economics)
- NEP-TID-2010-09-25 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Lokshin, Boris & Mohnen, Pierre, 2013.
"Do R&D tax incentives lead to higher wages for R&D workers? Evidence from The Netherlands,"
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- Lokshin, Boris & Mohnen, Pierre, 2012. "Do R&D tax incentives lead to higher wages for R&D workers? Evidence from the Netherlands," UNU-MERIT Working Paper Series 058, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
- Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
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