| ID | 159069 |
| Title Proper | Do R&D tax incentives work? Firm-level evidence from China |
| Language | ENG |
| Author | Jia, Junxue |
| Summary / Abstract (Note) | Tax incentives have been used worldwide to encourage firm R&D, but there is little evidence on their effectiveness as a policy tool in developing countries. We use a panel dataset of Chinese listed companies covering 2007 to 2013 to assess the effects of tax incentives on firm R&D expenditures and analyze how institutional conditions shape these effects. Our results show that tax incentives motivate R&D expenditures for our sample firms. A 10% reduction in R&D user costs leads firms to increase R&D expenditures by 3.97% in the short run. We also find considerable effect heterogeneity: Tax incentives significantly stimulate R&D in private firms but have little influence on state-owned enterprises' R&D expenditures. Moreover, the effects of tax incentives are more pronounced for private firms without political connections. Hence, reducing political intervention complements tax incentives' capacity to foster firm R&D in developing countries. |
| `In' analytical Note | China Economic Review Vol. 45; Dec 2017: p.50-66 |
| Journal Source | China Economic Review 2017-12 |
| Key Words | State Ownership ; Tax Incentive ; Political Connection ; Firm R&D |