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Measuring the Effectiveness of R&D Tax Credits in the Netherlands

Boris Lokshin and Pierre Mohnen ()

No 25, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper examines the impact of the Dutch R&D fiscal incentive program, known as WBSO, on R&D capital formation. Taking a factor-demand approach we measure the elasticity of firm R&D capital accumulation to its user cost. An econometric model is estimated using a rich unbalanced panel covering the period 1996-2004 with firm-specific R&D user costs varying with tax incentives. Using the estimated user cost elasticity, we examine the impact of the R&D incentive program. We find evidence that the program of R&D incentives in the Netherlands has been effective in reducing the user cost of R&D and in stimulating firms' investment in R&D.

Keywords: R&D tax credits; panel data; crowding out; user-cost elasticity; R&D; fiscal incentives (search for similar items in EconPapers)
JEL-codes: O32 O38 H25 H50 C23 (search for similar items in EconPapers)
Date: 2007
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