Optimization in R&D intensity and tax on corporate profits for supporting labor productivity of nations
- 670 Downloads
The purpose of this study is to analyze the rates of R&D investments and taxes levied on profits of firms that can optimize the labour productivity of nations. Statistical evidence, based on OECD data, reveals that (very) high rates of R&D intensity and tax on corporate profits do not maximize the labour productivity of nations. In particular, the models here suggest that the R&D intensity equal to about 2.5% and tax on corporate profits equal to 3.1% of the GDP seem to maximize the labour productivity of countries. Beyond these optimal thresholds, the labor productivity begins to decrease. These results can be explained by the curvilinear relationship between labour productivity and R&D intensity, and between labour productivity and tax on corporate profits. Some factors and environmental determinants of these results are discussed. These findings can clarify whenever possible, some sources of labor productivity and suggest a research and industrial policy of optimal rates of R&D intensity and tax on corporate profits (as percentage of GDP) directed to support competitive advantage, technological innovation and wealth creation of nations over time.
KeywordsProductivity R&D investment R&D intensity Tax on corporate profits Labour Curvilinear relation Innovation Optimization Technology transfer OECD countries
JEL ClassificationC00 J24 O32 O47 H21 H25
I gratefully acknowledge financial support from the CNR - National Research Council of Italy for my visiting at Arizona State University (Grants 0072373-2014 and 0003005-2016) where this research started in 2014. The author thanks two anonymous referees and editors of The Journal of Technology Transfer for helpful comments and suggestions The author declares that he has no relevant or material financial interests that relate to the research discussed in this paper.
- Benos, N. (2009). Fiscal policy and economic growth: Empirical evidence from EU countries, Centre of Planning and Economic Research Discussion Paper 107. Athens: Greece.Google Scholar
- Cavallo, E., Ferrari, E., Bollani, L., & Coccia, M. (2014b). Strategic management implications for the adoption of technological innovations in agricultural tractor: The role of scale factors and environmental attitude. Technology Analysis & Strategic Management, 26(7), 765–779.CrossRefGoogle Scholar
- Coccia, M. (2001). Satisfaction, work involvement and R&D performance. International Journal of Human Resources Development and Management, 1(2/3/4), 268–282.Google Scholar
- Coccia, M. (2005). Countrymetrics: Valutazione della performance economica e tecnologica dei paesi e posizionamento dell’Italia. Rivista Internazionale di Scienze Sociali, 113(3), 377–412.Google Scholar
- Coccia, M. (2007). A new taxonomy of country performance and risk based on economic and technological indicators. Journal of Applied Economics, 10(1), 29–42.Google Scholar
- Coccia, M. (2013). What are the likely interactions among innovation, government debt, and employment? Innovation: The European Journal of Social Science Research, 26(4), 456–471.Google Scholar
- Coccia, M. (2014a). Socio-cultural origins of the patterns of technological innovation: What is the likely interaction among religious culture, religious plurality and innovation? Towards a theory of socio-cultural drivers of the patterns of technological innovation. Technology in Society, 36(1), 13–25.CrossRefGoogle Scholar
- Coccia, M. (2014b). Converging scientific fields and new technological paradigms as main drivers of the division of scientific labour in drug discovery process: The effects on strategic management of the R&D corporate change. Technology Analysis & Strategic Management, 26(7), 733–749.CrossRefGoogle Scholar
- Coccia, M. (2017). The source and nature of general purpose technologies for supporting next K-waves: Global leadership and the case study of the U.S. Navy’s Mobile User Objective System. Technological Forecasting and Social Change, 116(March), 331–339. doi: 10.1016/j.techfore.2016.05.019.CrossRefGoogle Scholar
- Cuneo, P., & Mairesse, J. (1984). Productivity and R&D at the firm level in French manufacturing. In Z. Griliches (Ed.), R&D, Patents and Productivity (pp. 375–392). Chicago, IL: University of Chicago Press.Google Scholar
- Delgado M., Ketels C., Porter M. E., Stern S. (2012). The determinants of National Competitiveness. In NBER working paper no. 18249, July, Cambridge, Massachusetts.Google Scholar
- Griliches, Z. (1973). Research expenditures and growth accounting. In R. B. Williams (Ed.), Science and Technology in Economic Growth. New York: John Wiley and Sons.Google Scholar
- Griliches, Z. (1995). R&D and productivity: Econometric results and measurement issues. In P. Stoneman (Ed.), Handbook of the Economics of Innovation and Technological Change (pp. 52–89). Oxford: Basil Blackwell.Google Scholar
- Griliches, Z. (2000). R&D, education and productivity: A retrospective. Cambridge, Massachusetts: Harvard University Press.Google Scholar
- Griliches, Z., & Lichtenberg, F. R. (1982). R and D and Productivity at the Industry Level: Is There Still a Relationship? In NBER Working Paper no. 850, Cambridge, Massachusetts.Google Scholar
- Hall, B. H. (1996). The private and social returns to research and development. In B. L. R. Smith & C. E. Barfield (Eds.), Technology, R&D, and the economy. Washington, D.C: Brookings Institution and American Enterprise Institute.Google Scholar
- Hall R. E., Jones C. I., 1996. The productivity of nations. In NBER Working Paper 5812, November, Cambridge, Massachusetts.Google Scholar
- Hall, R. E., & Jorgenson, D. W. (1967). Tax policy and investment behavior. American Economic Review, 57(3), 391–414.Google Scholar
- Hall, B. H., Mairesse, J., & Mohnen, P. (2010). Measuring the returns to R&D. In B. H. Hall & N. Rosenberg (Eds.), Handbook of the Economics of Innovation (Vol. 2, pp. 1033–1082). Amsterdam: Elsevier.Google Scholar
- Kancs d’A., Siliverstovs B. (2012). R&D and non-linear productivity growth of heterogeneous firms, Institute for Prospective Technological Studies (IPTS). In IPTS working paper on corporate R&D and innovation no. 06/2012. European Commission, Joint Research Centre, Seville, Spain.Google Scholar
- Kancs d’A., Siliverstovs B. (2015). Employment effect of innovation. In JRC working papers on corporate R&D and innovation, n. 2015-07, European Commission, DG Joint Research Centre, Brussels.Google Scholar
- Lichtenberg, F. R. (1984). The relationship between federal contract R&D and company R&D. American Economic Review Papers and Proceedings, 74(2), 73–78.Google Scholar
- Lichtenberg F. R. 1992. R&D Investment and International Productivity Differences. In NBER working paper no. 4161, Cambridge, Massachusetts.Google Scholar
- Link, A. N. (1981a). Basic research and productivity increase in manufacturing: Additional evidence. The American Economic Review, 71(5), 1111–1112.Google Scholar
- Link, A. N. (1981b). Research and Development Activity in U.S. Manufacturing. New York: Praeger.Google Scholar
- Link, A. N. (1987). Technological change and productivity growth. London: Harwood Academic Publishers.Google Scholar
- Mairesse, J., & Sassenou, M. (1991). R&D and productivity: a survey of econometric studies at the firm level. Science Technology and Industry Review, 8(April), 9–45.Google Scholar
- Mansfield, E. (1980). Basic research and productivity increase in manufacturing. The American Economic Review, 70(5), 863–873.Google Scholar
- OECD. (2016a). https://data.oecd.org/. Accessed 9 September.
- OECD. (2016b). https://data.oecd.org/government.htm#profile-Tax. Accessed 18 October.
- OECD (2016c). https://data.oecd.org/lprdty/gdp-per-hour-worked.htm. Accessed 18 October.
- OECD. (2016d). https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm. Accessed 18 October.
- OECD. (2017). OECD iLibrary. http://www.oecd-ilibrary.org/economics/data/oecd-product-market-regulation-statistics/economy-wide-regulation_data-00593-en. Data extracted on 19 Jan 2017 20:43 UTC (GMT), doi: 10.1787/data-00593-en
- Siegel D., Griliches Z. 1991. Purchased Services, Outsourcing, Computers, and Productivity in Manufacturing, NBER Working Paper no. 3678, Cambridge, Massachusetts.Google Scholar
- Steil, B., Victor, D. G., Nelson, R. R. (Eds). (2002). Technological innovation and economic performance. Princeton: Princeton University Press.Google Scholar
- Stern S., Porter M. E., Furman J. L. (2000). The determinants of national innovative capacity. NBER Working Paper no. 7876, September, Cambridge, Massachusetts.Google Scholar
- Stiroh, K. J. (2001). What drives productivity growth? Federal Reserve Bank of New York-Economic Policy Review, 7(1), 37–59.Google Scholar
- Summers, L. H. (1988). Tax policy and international competitiveness. In J. A. Frenkel (Ed.), International Aspects of Fiscal Policies (pp. 349–386). Chicago: University of Chicago Press.Google Scholar
- Terleckyj N. E. (1974). Effects of R&D on the productivity growth of industries: an exploratory study. Report-National Planning Association n. 140, Washington D.C.Google Scholar