Industrial policy at work: Evidence from Romania’s income tax break for workers in IT

Industrial Policy for Growth and Diversification: A Conceptual Framework

“…These selective tax reductions can be successful (Manelici and Pantea 2021) but may also simply provide windfalls to the favored sectors with limited impact on employment. To increase the chances of success, policy should impose minimal constraints on firms' operations and productivity, giving firms flexibility to adjust their business models.…”

Are industrial policy instruments effective?

“…Even if the input additionality of R&D tax incentives is larger for small and medium-sized firms than for large firms (Box 2), the higher response of small firms to R&D incentives (Becker, 2014[14]; What Works Centre for Local Economic Growth, 2015[16]; European Commission, 2018 [23]; OECD, 2020 [17]; Lokshin and Mohnen, 2011 [24]; Appelt et al, 2016 [15]) may be due to financing constraints that would be better addressed by risk-sharing instruments (Dechezleprêtre et al, 2016[18]). Moreover, knowledge spillovers from small firms seem lower (European Commission, 2014 [25]; Bloom, Schankerman and Reenen, 2013 [20]).…”

“…In addition, interconnectedness of economies and fragmentation of global value chains has confirmed the increasing importance of coherence between regulatory frameworks (OECD, 2017 [139]). 24 This has become particularly apparent during the ongoing COVID-19 crisis, which highlighted international regulatory co-operation as key for embedding resilience in regulatory frameworks. Regulatory co-operation can help manage cross-border risks, promote work sharing and pooling of resources across government for effective regulatory responses, and reduce costs of production and trade of essential goods (OECD, 2020[140]).…”

“…Source:Baron and Pohlmann (2018[232]). Patents are considered as standard-essential when they cover a technology for which there is no alternative compatible with the standard 24. See the 2012 OECD Recommendation of the Council on Regulatory Policy and Governance, http://www.oecd.org/gov/regulatory-policy/2012-recommendation.htm 25.…”

Direct, Spillover and Welfare Effects of Regional Firm Subsidies

“…Our work is also related to the large empirical literature studying the effects of place-blind industrial policies (focusing on broader sectors) (see, e.g. Aghion et al, 2015, Liu, 2019, Lane, 2020, Manelicia and Pantea, 2021.…”