The labor effects of R&D tax incentives: evidence from VC-backed startups

Jun Chen and Shenje Hshieh

Review of Finance, 2024, vol. 28, issue 5, 1451-1482

Abstract: We evaluate the impact of the Protecting Americans from Tax Hikes (PATH) Act of 2015, which allowed some existing venture-capital-backed startups to monetize their research and development (R&D) tax credits against payroll taxes in the United States. We show that marginally eligible startups increase their demand for R&D workers more than marginally ineligible startups after the PATH Act’s enactment. These effects are stronger among startups that are financially constrained. Marginally eligible startups subsequently recruit workers with more education and experience and file more patents with new inventors. Our findings suggest payroll tax credits are effective in scaling startups and stimulating R&D activities through skilled labor recruitment.

Keywords: venture capital; entrepreneurship; R&D tax credits; payroll tax credits; skilled labor; startup scaling (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfae026 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:28:y:2024:i:5:p:1451-1482.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().