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The Effects of Government Subsidies on Business R&D Employment: Evidence From Oecd Countries

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  • Russell Thomson
  • Paul Jensen

Abstract

Existing evidence suggests that government subsidies stimulate business R&D expenditure. However, most studies fail to address the possibility that part of the observed increase in expenditure may be due to higher R&D wages. We consider the impact of different government subsidies on R&D workers in 25 OECD countries and find that the short run tax-price elasticity of R&D employment is marginally higher than existing estimates of the elasticity of expenditure with respect to the tax price of both labor and capital combined. We conclude that there is no evidence to indicate that wage inflation has seriously conflated past estimates of the effectiveness of government R&D subsidies.

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  • Russell Thomson & Paul Jensen, 2013. "The Effects of Government Subsidies on Business R&D Employment: Evidence From Oecd Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 281-310, June.
    • Handle: RePEc:ntj:journl:v:66:y:2013:i:2:p:281-310
    DOI: 10.17310/ntj.2013.2.01
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    Cited by:

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    2. Yigitcanlar, Tan & Sabatini-Marques, Jamile & da-Costa, Eduardo Moreira & Kamruzzaman, Md & Ioppolo, Giuseppe, 2019. "Stimulating technological innovation through incentives: Perceptions of Australian and Brazilian firms," Technological Forecasting and Social Change, Elsevier, vol. 146(C), pages 403-412.
    3. Viktorie Klímová & Vladimír Žítek & Maria Králová, 2020. "How Public R&D Support Affects Research Activity of Enterprises: Evidence from the Czech Republic," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 888-907, September.
    4. Melnik, Walter & Smyth, Andrew, 2024. "R&D tax credits and innovation," Journal of Public Economics, Elsevier, vol. 236(C).
    5. Zhangsheng Jiang, 2020. "Can the Gap and Rating of Market Expectation Promote Innovation Input of China Manufacturers?," Sustainability, MDPI, vol. 12(5), pages 1-19, March.
    6. Ferris, J. Stephen & Voia, Marcel C., 2015. "The effect of federal government size on private economic performance in Canada: 1870–2011," Economic Modelling, Elsevier, vol. 49(C), pages 172-185.
    7. Afcha, S. & García-Quevedo, J. & Mas-Verdú, F., 2023. "Gaining or losing PhDs: What are the effects on firms' linkages with universities?," Technological Forecasting and Social Change, Elsevier, vol. 186(PA).

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