The Impact of Innovation and Green Fiscal Incentives on Employment in Spain

Abstract

Questions remain whether the government is aware of difyculties of incentive schemes, its effectiveness, implications and conditions that are required so policy instrument can be put to the best use. Using a corporate tax dataset for MSMEs (micro yrms) and SMEs in 2008, we use OLS to study the relationship between employment and environmental investment tax credit (EI) and technological innovation tax credit (R&D&I). Our results show a positive impact of EI and R&D&I tax credit on employment for MSMEs and SMEs. The impact is stronger for R&D&I tax credit than for EI tax credit and stronger for MSMEs than for SMEs. Also, the impacts of both tax credits are independent of each other. We help to provide insights into the impacts of two types of tax credits on employment level for micro and SMEs that are the backbone of an economy. The important thing is the government must remain engaged in both green and technology policies to ensure policy intervention schemes are powerful and effective.