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Dynamics of firm participation in R&D tax credit and subsidy programs

Author

Listed:
  • Isabel Busom

    () (Departament d’Economia Aplicada, Universitat Autonoma de Barcelona)

  • Beatriz Corchuelo

    () (Universidad de Extremadura, Departamento de Economía)

  • Ester Martínez-Ros

    () (Universidad Carlos III de Madrid, Departamento de Economía de la Empresa)

Abstract

We provide comparative evidence on R&D tax credit and subsidy programs by studying whether firms' participation in each program exhibits state dependence and whether cross program interactions exist and are significant. We use a panel of manufacturing Spanish firms, which could use both types of support, to estimate a random effects bivariate dynamic probit model of program participation. We find that true state dependence of participation in R&D subsidy and tax credit programs accounts respectively for about 55% and 60% of observed persistence. In contrast, we do not find evidence of cross program interaction, suggesting that each tool is used by firms with different profiles. Digging on the role of some observable variables, we find that both programs reach on average stable R&D performers, and that they do not foster participation of young firms relative to older ones. We also identify significant differences across programs: while diversified and commercially successful firms are more likely to use tax incentives, those with high productivity are more likely to obtain subsidies. We discuss some policy implications of these findings

Suggested Citation

  • Isabel Busom & Beatriz Corchuelo & Ester Martínez-Ros, 2015. "Dynamics of firm participation in R&D tax credit and subsidy programs," Working Papers wpdea1503, Department of Applied Economics at Universitat Autonoma of Barcelona.
  • Handle: RePEc:uab:wprdea:wpdea1503
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    References listed on IDEAS

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    Cited by:

    1. Michel Dumont & André Spithoven & Peter Teirlinck, 2016. "Public Support for R&D and the Educational Mix of R&D Employees," CESifo Economic Studies, CESifo, vol. 62(3), pages 426-452.
    2. Michel Dumont, 2015. "Working Paper 05-15 - Evaluation of federal tax incentives for private R&D in Belgium: An update," Working Papers 1505, Federal Planning Bureau, Belgium.

    More about this item

    Keywords

    R&D; innovation policy; tax incentives; subsidies; persistence; dynamic random effects; bivariate probit;

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