Tax incentives, Private Investment and Employment: Evidence from an Ecuadorian reform

Camino-Mogro, Segundo (2022): Tax incentives, Private Investment and Employment: Evidence from an Ecuadorian reform.

Abstract

Tax incentives are a common policy to attract investment and create formal employment in developing countries. However, scarce evidence is available that study the impact of such reforms. This paper estimates the effect of the Organic Law for Productive Development, Attraction of Investments, Generation of Employment and Stability and Fiscal Balance on new investment and employment applied in august 2018 in Ecuador. Using event study designs and difference-in-differences models, I find that the policy implementation does not have an effect on the attraction of new investments and creation of new employment for prioritized sectors compared to non-prioritized sectors over the last quarter of 2018 and the 2019. Also, I provide several robustness checks to support the results. This matters from a policy perspective in a country with a low private investments and high share of people out of formal employment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax incentives; employment; investment; developing country; Ecuador
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock

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