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Rent Sharing under Innovation Tax Breaks

Author

Listed:
  • Sabien Dobbelaere

    (Vrije Universiteit Amsterdam)

  • Ana Popovici

    (Vrije Universiteit Amsterdam)

Abstract

We study whether firms share gains from innovation tax incentives with incumbent workers and whether such rent sharing is associated with increased worker retention. The Dutch innovation box reduces tax rates on profits from in-house innovation. Linking first-time beneficiaries to matched employer-employee data, we combine nearest-neighbour matching with staggered difference-in-differences. Part of the additional after-tax surplus is passed on to incumbent workers: wages rise by 3.27% on average, with increases of 2.05% for workers least involved in R&D and 4.14% for tertiary-educated STEM workers. Descriptively, treated non-R&D incumbents are 3.47 percentage points less likely to switch employers following treatment.

Suggested Citation

  • Sabien Dobbelaere & Ana Popovici, 2026. "Rent Sharing under Innovation Tax Breaks," Tinbergen Institute Discussion Papers 26-087/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20260087
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    Keywords

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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