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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)

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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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 034.

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

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Keywords: price effect of tax incentives; tax credits; panel data model; R&D workers; wages;

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