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

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  • Boris Lokshin
  • Pierre Mohnen

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.

Suggested Citation

  • Boris Lokshin & Pierre Mohnen, 2007. "Measuring the Effectiveness of R&D tax credits in the Netherlands," CIRANO Working Papers 2007s-29, CIRANO.
  • Handle: RePEc:cir:cirwor:2007s-29
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rufin Baghana & Pierre Mohnen, 2009. "Effectiveness of R&D tax incentives in small and large enterprises in Québec," Small Business Economics, Springer, vol. 33(1), pages 91-107, June.
    2. Jürgen Janger & Michael Böheim & Martin Falk & Rahel Falk & Werner Hölzl & Daniela Kletzan-Slamanig & Michael Peneder & Andreas Reinstaller & Fabian Unterlass, 2010. "Research and Innovation Policies after the Crisis," WIFO Monatsberichte (monthly reports), WIFO, vol. 83(8), pages 675-689, August.
    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. Castellacci, Fulvio & Lie, Christine Mee, 2015. "Do the effects of R&D tax credits vary across industries? A meta-regression analysis," Research Policy, Elsevier, vol. 44(4), pages 819-832.
    5. 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.
    6. Erik Stam & Karl Wennberg, 2009. "The roles of R&D in new firm growth," Small Business Economics, Springer, vol. 33(1), pages 77-89, June.
    7. P. Mohnen & F. Palm & S. Loeff & A. Tiwari, 2008. "Financial Constraints and Other Obstacles: are they a Threat to Innovation Activity?," De Economist, Springer, vol. 156(2), pages 201-214, June.
    8. Mohnen, Pierre & Lokshin, Boris, 2009. "What does it take for an R&D tax incentive policy to be effective?," MERIT Working Papers 014, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Gale, William & Brown, Samuel, 2013. "Small Business, Innovation, and Tax Policy: A Review," MPRA Paper 57384, University Library of Munich, Germany.

    More about this item

    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.;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; 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; Spatio-temporal Models

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