Munich Personal RePEc Archive

The Effect of Fiscal Incentives on Business R&D

Bucci, Valeria (2019): The Effect of Fiscal Incentives on Business R&D. Published in: International Journal of Economics, Finance and Management Sciences , Vol. 2, No. 7 (18 April 2019): pp. 37-44.

[img] PDF
MPRA_paper_95333.pdf

Download (685kB)

Abstract

This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.