IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa11p681.html
   My bibliography  Save this paper

Do Innovation Incentives Work? Evidence From The Italian Manufacturing Sector

Author

Listed:
  • Federico Biagi

    ()

  • Massimo Loi

Abstract

The main purpose of this study is to investigate upon the impact of fiscal incentives on firm's innovative performance. We use data from the 7th, 8th and 9th waves of the "Indagine sulle Imprese Manifatturiere Italiane" by Unicredit (previously managed by Capitalia-Mediocredito Centrale), which contains information on both product and process innovation by manufacturing firms, on the amount of resources invested in R&D (if such amount is positive) and it is also informative of the existence of forms of fiscal incentive for R&D and investment in innovative activities. In our study we use different techniques. First we look at Average Treatment Effects, under the assumption of "selection on observables", implying that the econometrician has access to all the variables affecting the likelihood of being treated. In this part of the paper we verify whether -everything else constant (i.e. for a given value of the propensity score)- there is evidence that firms that have access to fiscal incentives tend to innovate more. In the second part of our study we cast some doubts on the plausibility of the "selection on observables" assumption and we look more in depth at one specific case of fiscal incentive: the one provided by Law 140/1999 to firms located in "depressed areas" (as defined by the law itself). We focus on this law because it is particularly important from a policy perspective within the Italian dual economy, but also because it allows us a more precise estimate of the treatment effect in a situation where treatment status (i.e. access to the incentive) is likely to depend to the same (unobserved) factors that affect the innovation outcome. In such a situation OLS estimated are biased and inconsistent and we have to use instrumental variable estimation. We choose to instrument treatment using the eligibility rules for treatment and we find the confirmation that indeed an endogeneity issue exists and that its effects are stronger the weaker is the impact of treatment on the outcome variable.

Suggested Citation

  • Federico Biagi & Massimo Loi, 2011. "Do Innovation Incentives Work? Evidence From The Italian Manufacturing Sector," ERSA conference papers ersa11p681, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p681
    as

    Download full text from publisher

    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal00681.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
    2. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 01 Feb 2018.
    4. Guido de Blasio & Davide Fantino & Guido Pellegrini, 2015. "Evaluating the impact of innovation incentives: evidence from an unexpected shortage of funds," Industrial and Corporate Change, Oxford University Press, vol. 24(6), pages 1285-1314.
    5. Shahidur R. Khandker & Gayatri B. Koolwal & Hussain A. Samad, 2010. "Handbook on Impact Evaluation : Quantitative Methods and Practices," World Bank Publications, The World Bank, number 2693.
    6. Maria Parisi & Alessandro Sembenelli, 2003. "Is Private R & D Spending Sensitive to Its Price? Empirical Evidence on Panel Data for Italy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(4), pages 357-377, December.
    7. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa11p681. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier). General contact details of provider: http://www.ersa.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.