Measuring firm-level productivity convergence in the UK: the role of taxation and R&D investment

Bournakis, Ioannis and Sushanta, Mallick and Kernohan, David and Tsouknidis, Dimitris A. (2013) Measuring firm-level productivity convergence in the UK: the role of taxation and R&D investment. Working Paper. Queen Mary University of London, London.

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Abstract

This paper examines the direct effects of corporate tax on firm productivity along with the interaction effects of tax policy and R&D activity on productivity at firm level for over 13,062 firms during 2004-2011. Our main findings are first, that there is evidence for productivity convergence and we find that there is a positive robust relationship between R&D and firm productivity, whereas tax policy has a negative distortionary effect on TFP. Second, firms with greater export orientation do not seem to achieve much improvement in productivity, whereas the favourable productivity effect in the case of R&D-based firms suggests that if there are tax incentives in place for R&D type activity, it can promote innovation and drive productivity convergence (lagging firms closing the technology gap with those at the frontier), particularly so when there is a continued decline in overall economic activity. The results also show a significant non-linear effect of tax rate on firm-level productivity, identifying an inverse U-shaped relationship.

Item Type: Monograph (Working Paper)
Additional Information: CGR Working Paper 45
Research Areas: A. > Business School > Economics
Item ID: 12878
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Depositing User: Ioannis Bournakis
Date Deposited: 27 Dec 2013 07:16
Last Modified: 13 Oct 2016 14:29
URI: http://eprints.mdx.ac.uk/id/eprint/12878

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