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

Working paper


Bournakis, I., Sushanta, M., Kernohan, D. and Tsouknidis, D. 2013. Measuring firm-level productivity convergence in the UK: the role of taxation and R&D investment. London Queen Mary University of London.
TypeWorking paper
TitleMeasuring firm-level productivity convergence in the UK: the role of taxation and R&D investment
AuthorsBournakis, I., Sushanta, M., Kernohan, D. and Tsouknidis, D.
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.

PublisherQueen Mary University of London
Place of publicationLondon
Publication process dates
Deposited27 Dec 2013
Output statusPublished
Additional information

CGR Working Paper 45

Web address (URL)http://webspace.qmul.ac.uk/pmartins/CGRWP45.pdf
LanguageEnglish
Institution nameQueen Mary University of London
Department nameCentre for Globalisation Research, School of Business and Management
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