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This paper examines the impact of the Dutch R&D tax incentives program, known as WBSO, on the wages of R&D workers. In the model these wages are partly determined by the government's WBSO tax disbursements. The authors construct detailed firm- and time specific R&D tax credit rates as a function of the R&D tax incentives scheme to capture the wage effects of the government R&D support. An instrumental-variables econometric model is estimated using an unbalanced firm-level panel data covering the period 1996-2004. After controlling for firm and industry effects and business cycle fluctuations, R&D tax incentives are found to increase R&D wages.
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