Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108535
Authors: 
d'Andria, Diego
Year of Publication: 
2014
Series/Report no.: 
Jena Economic Research Papers 2014-028
Abstract: 
A principal-agent multitasking model is used to explore the effects of different tax schemes on innovation in a pure knowledge economy. Corporate taxes and labor income taxes can affect both the firm owner's and the employee's incentives to commit to innovative tasks, when the former compensates the latter (a manager, technical or R&D employee) by means of variable pay tied to measures of the company's success. Results point to a complementary role between 'patent box' tax incentives and reductions in the tax rate levied on profit sharing schemes. This complementarity holds, albeit with different relative importance for the two tax incentives, also with non-deductible labor costs, with a stochastic innovation value coupled with a risk-averse agent, and with multiple principals competing for talented agents.
Subjects: 
incentives to innovate
multitasking models
patent box
principal-agent models
profit sharing schemes
tax incentives for R&D
JEL: 
H2
O31
J33
Document Type: 
Working Paper

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