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Impact Assessment of Tax Incentives to Foster Industrial Innovation in Brazil: The Case of Law 11,196/05

Daniel Colombo ()

No 2016_30, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper evaluates the effects of tax incentives for technological innovation in Brazil established by the Law 11,196/05 ("Lei do Bem"), to test whether they have increased resources for business innovation projects and had any significant impact on their results. The average treatment effect on the treated (ATT) is estimated using microdata on the firm level from the Brazilian Industrial Innovation Survey (PINTEC) conducted by IBGE, and applying a propensity score matching (PSM) technique, used in recent similar analyzes. Results suggest the policy positively affects R&D expenditures, number of research staff and the base of firms investing in innovation. Average impact on spending, nevertheless, falls short of the volume of tax break per firm. Moreover, benefited firms have more chances to innovate and experience higher growth in terms of overall number of employees. Such results are in accordance with findings of most of the empirical literature on innovation tax incentives. The study provides empirical support in favor of tax incentives as part of a government strategy to boost entrepreneurial innovation in the country.

Keywords: Tax incentives; technological innovation; impact assessment; “Lei do Bem”. (search for similar items in EconPapers)
JEL-codes: H25 O38 O54 (search for similar items in EconPapers)
Date: 2016-12-01
New Economics Papers: this item is included in nep-ent, nep-ino and nep-tid
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