Silvia Appelt, Matej Bajgar, Chiara Criscuolo, Fernando Galindo-Rueda, 14 October 2020

Tax incentives have become the number one policy tool that governments use to encourage companies to invest in research and development. This column presents the results of a new analysis of firm-level records in 20 OECD countries, which suggests that, overall, R&D tax incentives are effective in boosting business R&D but their effectiveness differs sharply across firms of different sizes and across countries. Tax incentives are also better suited for supporting R&D projects closer to the market while direct government funding – such as through grants and R&D procurement – is more conducive to research that may not immediately result in new goods or services.

Andrea Ichino, Martin Olsson, Barbara Petrongolo, Peter Skogman Thoursie, 11 September 2019

Gender identity norms are possible drivers of persistent gender inequalities in the labour market, but the extent to which such norms restrict the behaviour of couples is debated. This column examines how households in Sweden changed their allocation of home production in response to the introduction of a tax credit that altered the marginal tax rates (and the relative take-home pay) in different ways for spouses in couples. It finds that immigrant couples, who tend to come from countries with more traditional gender norms than Sweden, responded more strongly to a reduction in the husband’s tax rate than the wife’s. By not responding to wives’ tax cuts, these couples may forgo as much as £2,000 per year in household disposable income.

Peter Egger, Nicole Loumeau, 16 January 2019

Innovative activity is unevenly distributed geographically, with regional characteristics such as global market accessibility or an innovation-promoting policy environment affecting the spatial distribution. Using global data on regional characteristics, regional patenting output, and innovation-promoting policy environments, this column examines the origins of innovation clusters, and particularly the role of R&D tax policy instruments, in attracting innovative firms. It estimates that innovation-promoting R&D tax policy instruments contribute to about one-tenth of the long-term economic growth around the globe.

Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato, Daniel Yi Xu, 28 August 2018

Tax incentives to encourage firms to invest in R&D may also encourage firms to fraudulently relabel other expenses as R&D. The column finds that 30% of the increase in reported R&D in response to a Chinese incentive programme was due to relabelling. The size and type of tax break has a large effect on both the level of participation and the incentive to relabel.

Ryoko Ueda, Keiichiro Kobayashi, 18 November 2017

Strategic shareholding – companies holding minority shares in other companies for the sake of business relations – can be used for anticompetition purposes or to reduce pressure from shareholders. This column explores strategic shareholding in Japan. Roughly one third of shareholders are found to be strategic, with three quarters of these being business corporations. However, in Japanese corporate culture it is not uncommon for such shareholding to occur as part of technical or business partnerships without affecting managerial independence.

Murray Leibbrandt, 29 March 2017

Are tax incentives effective in increasing youth employment? In this video, Murray Leibbrandt discusses how this policy works in South Africa. This video was recorded at the UNU-WIDER Conference in Pretoria in December 2016.

Elīna Gaillard, Bas Straathof, 20 January 2015

Tax incentives have become a common policy tool for encouraging firms to spend more on research and development – and the recession has further raised interest in the effectiveness of this policy. This column highlights a new review of the empirical evidence, which suggests that fiscal incentives for R&D only modestly stimulate R&D, while their impact on innovation and economic growth is uncertain.

Laurent Gobillon, Thierry Magnac, Harris Selod, 24 January 2011

The employment effects of enterprise zones are widely studied but remain uncertain. This column examines the impact of recent tax incentives designed to attract businesses to poor residential areas around Paris. It finds that while unemployment decreases, the costs of the programme leave its efficacy open to interpretation.

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