The Effect of Fiscal Incentives on Business R&D

Valeria Bucci

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.

Keywords: Innovation; R&D; Fiscal Incentives; Marginal Tax Savings (search for similar items in EconPapers)
JEL-codes: H25 H32 O32 O38 (search for similar items in EconPapers)
Date: 2019-04-18
New Economics Papers: this item is included in nep-eur, nep-ino, nep-pbe, nep-sbm and nep-tid
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Published in International Journal of Economics, Finance and Management Sciences 7.2(2019): pp. 37-44

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:95333

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