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Optimization in R&D intensity and tax on corporate profits for supporting labor productivity of nations

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Abstract

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.

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Notes

  1. This study uses interchangeably the terms R&D investments as percentage of GDP and Gross domestic spending on R&D as percentage of GDP to indicate R&D intensity of countries.

  2. Cf. also, Coccia 2009b, 2010b, 2012b, c, 2014a; for sources of innovation in firms, see Coccia 2014b, 2016b, c.

  3. Cf. Cavallo et al., 2014a, 2014b for technological innovations in agricultural tractors that foster the productivity of farms and agricultural systems; Calabrese et al., 2005 for innovations that support productivity of SMEs. Cariola and Coccia 2004, Coccia 2001, 2004, 2008b, c, 2009c, 2010d, for the vital role of public research labs in generating innovations, technical knowledge and technology transfer.

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Acknowledgements

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.

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Correspondence to Mario Coccia.

Appendices

Appendix 1: Sample of countries

Australia

Austria

Belgium

Canada

Chile

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Iceland

Ireland

Israel

Italy

Japan

Korea

Latvia

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Rep.

Slovenia

Spain

Sweden

Switzerland

Turkey

United Kingdom

 

United States

Appendix 2: Descriptive statistics and correlations

See Tables 7, 8, 9, 10 and 11.

Table 7 Descriptive statistics
Table 8 Bivariate correlation
Table 9 Partial correlation
Table 10 Bivariate correlation
Table 11 Partial correlation

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Coccia, M. Optimization in R&D intensity and tax on corporate profits for supporting labor productivity of nations. J Technol Transf 43, 792–814 (2018). https://doi.org/10.1007/s10961-017-9572-1

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