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Impact Assessment of Tax Incentives to Foster Industrial Innovation in Brazil: The Case of Law 11,196/05

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  • Daniel Gama e Colombo
Abstract
This paper evaluates the effects of tax incentives for technological innovation in Brazil established by the Law 11,196/05 ("Lei do Bem"), to test whether they have increased resources for business innovation projects and had any significant impact on their results. The average treatment effect on the treated (ATT) is estimated using microdata on the firm level from the Brazilian Industrial Innovation Survey (PINTEC) conducted by IBGE, and applying a propensity score matching (PSM) technique, used in recent similar analyzes. Results suggest the policy positively affects R&D expenditures, number of research staff and the base of firms investing in innovation. Average impact on spending, nevertheless, falls short of the volume of tax break per firm. Moreover, benefited firms have more chances to innovate and experience higher growth in terms of overall number of employees. Such results are in accordance with findings of most of the empirical literature on innovation tax incentives. The study provides empirical support in favor of tax incentives as part of a government strategy to boost entrepreneurial innovation in the country.

Suggested Citation

  • Daniel Gama e Colombo, 2016. "Impact Assessment of Tax Incentives to Foster Industrial Innovation in Brazil: The Case of Law 11,196/05," Working Papers, Department of Economics 2016_30, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2016wpecon30
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    More about this item

    Keywords

    Tax incentives; technological innovation; impact assessment; “Lei do Bem”.;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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