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Liquidity and Firms’ Response to Fiscal Stimulus

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  • Antonio Acconcia
  • Claudia Cantabene

Abstract

A stimulus programme allowed firms in Italy to receive tax credits for R&D expenditure in 2009. Among traditional firms, liquidity is relevant to the response to the stimulus: recipients firms with relative large cash holdings raised R&D expenditure, while those with low liquidity did not vary it. High‐tech firms did not change their total R&D, consistent with their tendency to smooth R&D expenditure through time, though they changed its composition in favour of outsourcing activity and to the detriment of employment. When the fiscal stimulus pushed R&D higher, it also induced a positive transitory effect on the firm's performance.

Suggested Citation

  • Antonio Acconcia & Claudia Cantabene, 2018. "Liquidity and Firms’ Response to Fiscal Stimulus," Economic Journal, Royal Economic Society, vol. 128(613), pages 1759-1785, August.
    • Handle: RePEc:wly:econjl:v:128:y:2018:i:613:p:1759-1785
    DOI: 10.1111/ecoj.12499
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    1. Starodubrovskaya Irina & Slavgorodskaya Margarita & Nina Mironova, 2008. "Municipal Reform in 2007: Specifics of Implementation," Research Paper Series, Gaidar Institute for Economic Policy, issue 113P.
    2. Bronwyn H. Hall, 2020. "Tax Policy for Innovation," NBER Chapters, in: Innovation and Public Policy, pages 151-188, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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