The Impact of R&D Tax Incentives on Employment: Evidence from Chinese Manufacturing Firms

Yang Hu (), Wei Cui, Xiuting Piao, Yingying Ye, Yuxiang Cheng and Song Zeng
Additional contact information
Yang Hu: Peking University
Wei Cui: Peking University
Xiuting Piao: Peking University
Yingying Ye: Zhejiang University of Finance and Economics
Yuxiang Cheng: Peking University
Song Zeng: Peking University

Journal of the Knowledge Economy, 2025, vol. 16, issue 1, No 81, 2310-2340

Abstract: Abstract Using a sample of 12,690 observations from manufacturing firms listed in China between 2011 and 2018 and adopting a difference-in-difference approach, we examine the effect of Additional Deduction Policy for R&D Expenses (ADPRD) on employment. Our findings reveal that the ADPRD significantly increases corporate employment; furthermore, we identify three underlying mechanisms: the substitution effect, output effect and liquidity effect. Interestingly, the combined influence of the output and liquidity effects outweighs the substitution effect, resulting in a positive net effect. Additional analysis indicates that the impact of ADPRD on employment is more pronounced for non-state-owned firms, those with lower substitution elasticity, and those with lower dividend payout ratio. Overall, our study provides empirical evidence on the relationship between the ADPRD and corporate employment and offers valuable insights for governments seeking to align innovation and employment policies.

Keywords: Additional Deduction Policy for R&D Expenses; Employment; Substitution Effect; Output Effect; Liquidity Effect (search for similar items in EconPapers)
JEL-codes: H25 J21 O31 O38 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-024-02091-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-02091-9

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-024-02091-9

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().