IDEAS home Printed from https://ideas.repec.org/a/wse/journl/v1y2014i1p1-19.html
   My bibliography  Save this article

Labor tax and relative cost of R&D

Author

Listed:
  • Monika Lewandowska-Kalina

    (Warsaw School of Economics)

  • Lech Kalina

    (Warsaw School of Economics)

Abstract

This paper examines the impact of taxation of labor on investment in Research and Development. Given the central role of R&D as an en- gine of business expansion and economy growth, issue of estimating the barriers to R&D is a vital one, both from theoretical and practical point of view. We analyse the impact of labor taxation on decision to invest in R&D. We show that labor taxation changes relative costs of R&D investment versus fixed capital formation. It leads to allocation of investment more towards physical capital formation than R&D invest- ment. In the empirical part of the paper, using panel and cross-section of countries, we shed light on the impact of taxation of labor on R&D. Our estimates indicate that labor tax has a significant adverse impact on R&D investment, and its negative impact is larger for R&D than for physical capital.

Suggested Citation

  • Monika Lewandowska-Kalina & Lech Kalina, 2014. "Labor tax and relative cost of R&D," Applied Econometrics Papers, Department of Applied Econometrics, Warsaw School of Economics, vol. 1(1), pages 1-19.
  • Handle: RePEc:wse:journl:v:1:y:2014:i:1:p:1-19
    as

    Download full text from publisher

    File URL: http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aep14-01.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 445-502.
    2. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-1280, November.
    3. Dana Hajkova & Giuseppe Nicoletti & Laura Vartia & Kwang-Yeol Yoo, 2007. "Taxation and business environment as drivers of foreign direct investment in OECD countries," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 7-38.
    4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    5. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    6. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    7. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1119-1135.
    8. Graham, John R., 1996. "Debt and the marginal tax rate," Journal of Financial Economics, Elsevier, vol. 41(1), pages 41-73, May.
    9. Christina Elschner & Lothar Lammersen & Michael Overesch & Robert Schwager, 2006. "The Effective Tax Burden of Companies and of Highly Skilled Manpower: Tax Policy Strategies in a Globalised Economy," Fiscal Studies, Institute for Fiscal Studies, vol. 27(4), pages 513-534, December.
    10. Cullen, Julie Berry & Gordon, Roger H., 2007. "Taxes and entrepreneurial risk-taking: Theory and evidence for the U.S," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1479-1505, August.
    11. Ryoo, J. & Rosen, S., 1992. "The Market for Engineers," University of Chicago - Economics Research Center 92-10, Chicago - Economics Research Center.
      • Ryoo, Jaewoo & Rosen, Sherwin, 1992. "The Market for Engineers," Working Papers 83, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    12. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    13. Lee, Young & Gordon, Roger H., 2005. "Tax structure and economic growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1027-1043, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    2. Tweneboah Senzu, Emmanuel & Ndebugri, Haruna, 2018. "The economic evidence in the relationship between corporate tax and private investment in Ghana," MPRA Paper 84729, University Library of Munich, Germany.
    3. Andrew Atkeson & Ariel Burstein, 2019. "Aggregate Implications of Innovation Policy," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2625-2683.
    4. Petutschnig, Matthias, 2017. "Future orientation and taxes: Evidence from big data," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 29(C), pages 14-31.
    5. Gene M. Grossman & Elhanan Helpman, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter.
    6. Michael Peneder & Karl Aiginger & Gernot Hutschenreiter & Markus Marterbauer, 2001. "Structural Change and Economic Growth," WIFO Studies, WIFO, number 20668.
    7. Deen Kemsley & Padmakumar Sivadasan & Venkat Subramaniam, 2018. "The composite dividend tax rate," Accounting and Business Research, Taylor & Francis Journals, vol. 48(7), pages 727-758, November.
    8. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    9. Pourya Darnihamedani & Joern Hendrich Block & Jolanda Hessels & Aram Simonyan, 2018. "Taxes, start-up costs, and innovative entrepreneurship," Small Business Economics, Springer, vol. 51(2), pages 355-369, August.
    10. Hines, James R. & Park, Jongsang, 2019. "Investment ramifications of distortionary tax subsidies," Journal of Public Economics, Elsevier, vol. 172(C), pages 36-51.
    11. Dackehag, Margareta & Hansson, Åsa, 2015. "Taxation of Dividend Income and Economic Growth: The Case of Europe," Working Paper Series 1081, Research Institute of Industrial Economics.
    12. Pourya Darnihamedani & Joern Hendrich Block & Jolanda Hessels & Aram Simonyan, 2015. "Start-up Costs, Taxes and Innovative Entrepreneurship," Tinbergen Institute Discussion Papers 15-013/VII, Tinbergen Institute.
    13. Gould, David M. & Gruben, William C., 1996. "The role of intellectual property rights in economic growth," Journal of Development Economics, Elsevier, vol. 48(2), pages 323-350, March.
    14. Dackehag , Margareta & Hansson, Åsa, 2012. "Taxation of Income and Economic Growth: An Empirical Analysis of 25 Rich OECD Countries," Working Papers 2012:6, Lund University, Department of Economics.
    15. G. Olcina & E. M. Tur & L. Escriche, 2020. "Cultural transmission and persistence of entrepreneurship," Small Business Economics, Springer, vol. 54(1), pages 155-172, January.
    16. Arturo Galindo & Marcela Melendez, 2010. "Corporate Tax Stimulus and Investment in Colombia," Research Department Publications 4664, Inter-American Development Bank, Research Department.
    17. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    18. Gilbert Ahamer, 2018. "Applying Global Databases to Foresight for Energy and Land Use: The GCDB Method," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 12(4), pages 46-61.
    19. Jing Xing, 2011. "Does tax structure affect economic growth? Empirical evidence from OECD countries," Working Papers 1120, Oxford University Centre for Business Taxation.
    20. Chong, Alberto E., 2006. "Does It Matter How People Speak?," IDB Publications (Working Papers) 1946, Inter-American Development Bank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wse:journl:v:1:y:2014:i:1:p:1-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marcin Owczarczuk (email available below). General contact details of provider: https://edirc.repec.org/data/dxwawpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.