Abstract
We use a longitudinal dataset of listed Chinese firms to evaluate the effects of participation in a high- and new-technology enterprise tax incentive programme on firm innovation. We advance understanding by first providing strong evidence of an economically significant average role of tax incentives in inducing input and output additionality. Second, we reveal vast heterogeneities in the input and output additionality effects across recipients, and that firm programme experience, innovation experience, certification likelihood and incentive size are important sources of these heterogeneities. Finally, we advance understanding of the dynamic effects of tax incentives by showing how the input and output additionality effects vary over time.
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