Intended and Unintended Effects of Public Incentives for Innovation. Quasi-Experimental Evidence From Italy

Abstract

This paper provides an extensive empirical evaluation of a policy introduced in Italy at the end of 2012 to incentivize young innovative start-up firms. Using a Regression Discontinuity Design (RDD) we estimate the causal effects of the policy on the firms’ share of intangible assets, turnover, number of employees, and number of partners. Our results indicate that two years after its implementation the policy was effective only in increasing the number of partners, thus attracting private investments, but failed, at least in the short run, in boosting innovation or increasing employment. It follows that the new investors generated by the policy might have been attracted only by the tax benefit and had little interest in innovation.