Newsletter February 2020
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In this issue:
Tax Incentives for Research and Development: Is There an Optimal Policy Mix?
CEPS EconPol Europe Lunch Debate, 16 March 2020, Brussels

Using the tax system to support research and development has become a very popular policy tool. Many countries are implementing incentives such as tax credits, patent boxes and direct subsidies to stimulate new R&D. But is there really a causal relationship between these policies and the R&D spending done by the businesses receiving the incentives? And if so, is this R&D productive, and does it have an impact on the wider economy? For our third lunch debate, we are delighted to present the latest research into this area, from Saïd Business School at the University of Oxford. We bring together the authors of the research with experts from government and business to ask: is there an optimal policy mix for incentivizing R&D?

Program and registration

Green Government Debt for the ‘Green Deal’?

The ‘Green Deal’ in its objective is highly ambitious and will absorb substantive financial resources, and it is not surprising that the potential role of higher public debt is being discussed. The European Central Bank is increasingly requested to provide green finance through its asset purchase programmes and similar suggestions are being made in national debates. But does an ambitious climate policy really provide compelling arguments for higher public debt? Friedrich Heinemann (EconPol Europe, ZEW Mannheim) argues that fighting climate change is not a convincing justification to open new loopholes in European debt rules and fiscal or monetary institutions.

EconPol Opinion 26

How Important are Local Knowledge Spillovers of Public R&D and What Drives Them?

There is a clear consensus that stimulating firm R&D is welfare-increasing due to positive externalities and uncertainty, but the question about the most efficient way to do so is still open to debate. This paper from Leonie Koch ( Ludwig Maximilian University of Munich) and Martin Simmler (EconPol Europe, Oxford University Centre for Business Taxation) analyzes the magnitude of local knowledge spillovers of public R&D in Germany and its determinants using patent application data. They find that firms file more patent applications when collaborating with (local) public institutions, that firms file more patent applications when citing a public patent, and that local public R&D seems to increase the number of patent applications by local firms. The authors conclude there is evidence for substantial local spillovers and that these are driven by non-specific knowledge spillovers.

EconPol Working Paper 42

Air Pollution & Migration: Exploiting a Natural Experiment from the Czech Republic

This paper from Štěpán Mikula (Masaryk University) and Mariola Pytliková (EconPol Europe, CERGE-EI) examines causal effects of air pollution on migration by exploiting a unique natural experiment of desulfurization of power plants in the region of North Bohemia in the Czech Republic after the fall of communism in 1989. They find that anti-emigration policies had no impact on emigration decisions, but the effect of air pollution on emigration tended to be stronger in municipalities with weaker social capital and in municipalities less equipped with man-made amenities. These results suggest that strengthening social capital, investing into better facilities in the area of education, health and social care, and promoting sport and cultural activities can partially mitigate the migratory response to air pollution.

EconPol Working Paper 43

Markups in a Dual Labor Market: The Case of the Netherlands

An expanding body of research finds a sharp increase in the average markups in the US and Europe, driven by firms located at the top of the markup distribution; other studies find that markups in the US and Europe have increased only moderately or even remained stable. These differing results have triggered a discussion on methodology, a key issue being the choice of the free input in the production function approach. Authors Gerrit Hugo van Heuvelen, Leon Bettendor and Gerdien Meijerink (EconPol Europe, CPB Netherlands Bureau for Economic Policy Analysis) show that the choice of the free input is crucial, and may explain at least some of the discrepancies in the findings in the recent literature. They illustrate this with the case of the Netherlands, which has a large share of flexible work arrangements and temporary labor contracts as well as fixed contracts.

EconPol Working Paper 44
EconPol Events
Parliamentary dinner | Report on the European Economy:
Fair Taxation in a Mobile World

2 March 2020
Brussels, Belgium
By invitation only please contact for further information

EconPol session on Closing Tax Loopholes, CEPS Ideas Lab
6 March 2020
CEPS, Brussels, Belgium
By invitation only please contact for further information

Joint CEPS EconPol Lunch Debate: Tax Incentives for Innovation
16 March 2020
CEPS, Brussels, Belgium
Program and registration
News from our Partners
CEPII newsletter
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IHS publications hub
Instituto Universitario de Economía Universidad Carlos III de Madrid – latest news
KOF Bulletin
REM – Research in Economics and Mathematics Newsletter
TSE news
Universita di Trento news
University of Oxford (Centre for Business Taxation) news and insights
VATT news
ZEW newsletter
About EconPol Europe
EconPol Europe is a cross-border voice for research in Europe, providing research-based contributions aimed at promoting growth, prosperity and social cohesion in Europe and, in particular, the European and Monetary Union. Our mission is to contribute our research findings to help solve the pressing economic and fiscal policy issues facing the European Union, and to anchor more deeply the idea of a united Europe within member states.

Our joint interdisciplinary research covers:

    •    sustainable growth and best practice,
    •    reform of EU policies and the EU budget,
    •    capital markets and the regulation of the financial sector and
    •    governance and macroeconomic policy in the European Monetary Union.

If you would like further information about EconPol Europe, please contact Juliet Shaw at

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Published: ifo Institute for Economic Research at the University of Munich,
Editor: Juliet Shaw.

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