Retained Earnings, Retained Workers: Rent-Sharing under Innovation Tax Breaks (with Sabien Dobbelaere)

We provide causal evidence that firms share retained earnings from innovation tax breaks with their incumbent workers. We exploit the Dutch Innovation Box policy — which cuts the effective corporate tax rate on qualifying innovation profits from 25% to 5%. Using matched employer-employee data covering the full Dutch workforce (2007–2023), together with a tailored k-nearest-neighbor matching procedure and a staggered difference-in-differences estimator, we compare incumbent workers at treated firms to observably similar incumbent workers at matched control firms. Incumbent workers at treated firms earn 4.3% higher annual base wages after treatment relative to matched controls, and this wage premium persists and grows over a ten-year post-treatment window. The effect is not confined to R&D personnel, indicating that firms share innovation rents broadly rather than only with the workers directly responsible for the innovation. Treated incumbents are also 1.6% less likely to separate from their employer in the long run, consistent with firms sharing rents strategically to retain workers who embody firm-specific knowledge accumulated during the innovation process. Our findings connect the literatures on corporate tax incidence, innovation policy evaluation, and rent-sharing, and show that innovation policy has first-order distributional consequences for the workers who make innovation possible.

Measuring Advertising Spillovers in the Automobile Industry (with Jose-Luis Moraga Gonzalez and Sandor Zsolt)

This paper examines the existence of advertising spillovers in the automobile industry. For this purpose, we formulate an empirical consideration set model of demand where advertising serves to increase buyer awareness. Each car model has an independent probability of being considered for purchase and this probability is influenced by a brand's own advertising, as well as the advertising of substitute models within the same brand, other brands within the same business group, and competing brands. We estimate the model using data from the Netherlands on regional car sales, prices, car advertising expenditures and car characteristics for the year 2008. We find evidence that own advertising increases the consideration probability of a car and that advertising spillovers are positive and sizable. These spillovers have important implications for firm strategy and market outcomes.

Work in progress

Labor Effects of Innovation Tax Breaks (with Sabien Dobbelaere)

Labor Force Composition and Competitivess (with Daniele Aglio and Sabien Dobbelaere)