Wage effects of R&D tax incentives: Evidence from the Netherlands

Lokshin, Boris and Mohnen, Pierre (2008). Wage effects of R&D tax incentives: Evidence from the Netherlands. UNU-MERIT.

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  • Author Lokshin, Boris
    Mohnen, Pierre
    Title Wage effects of R&D tax incentives: Evidence from the Netherlands
    Publication Date 2008
    Publisher UNU-MERIT
    Abstract This paper examines the impact of the Dutch R&D tax incentives program, known as WBSO, on the wages of R&D workers. In our model these wages are partly determined by the government’s WBSO tax disbursements. We construct detailed firm- and time specific R&D tax credit rates as a function of the R&D tax incentives scheme to capture the wage effects of the government R&D support. An instrumentalvariables econometric model is estimated using an unbalanced firm-level panel data covering the period 1996-2004. After controlling for firm and industry effects and business cycle fluctuations, R&D tax incentives are found to increase R&D wages. The R&D wage effect of these incentives is smaller than their effect on real R&D investment, but it is still sizeable. The elasticity of the R&D wage with respect to the fraction of the wage supported by the WBSO scheme is estimated at 0.1.
    Keyword Price effect of tax incentives
    Tax credits
    Panel data model
    R&D wages
    JEL O32
    O38
    H25
    J30
    C23
    Copyright Holder UNU-MERIT
    Copyright Year 2008
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 17:23:29 JST