UNU-MERIT Working Papers Series
Wage effects of R&D tax incentives: Evidence from the Netherlands
Boris Lokshin & Pierre Mohnen #2008-034This 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.
Key words: price effect of tax incentives; tax credits; panel data
model; R&D wages
JEL Codes: O32, O38, H25, J30, C23
UNU-MERIT Working Papers
ISSN 1871-9872
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