International Globalization: Current and Prospective
Paper Session
Sunday, Jan. 3, 2021 10:00 AM - 12:00 PM (EST)
- Chair: Joseph Pelzman, George Washington University
R&D Tax Credit Effectiveness: Evidence from South African Manufacturing Firms
Abstract
We analyze the impact of a R&D tax credit on R&D and export performance in manufacturing firms in South Africa for the period 2010–2017. The analysis exploits a rich database of comprehensive administrative firm level tax data from South Africa’s statutory revenue authority, which covers 153,103 manufacturing firms. We measure R&D activity in terms of in-house investment on R&D and investment on royalties. We use regression-based analysis -2SLS and GMM estimations- and also explore causal links using coarsened exact matching and propensity score models. Our results indicate that firms that undertake one of these R&D activities typically do not undertake the other, suggesting that firms may regard these as alternative strategies. In baseline regressions on the determinants of R&D, we find receipt of a R&D tax credit to be a positive and highly significant influence on expenditure on in-house R&D, but a negative and mostly insignificant influence on royalties; this is likely to be related to the apparent substitutability between these two forms of R&D investment. The causal analysis reveals that the R&D tax incentive is highly effective in incentivizing innovation and R&D, across a range of measures, with the notable exception of expenditure on royalties where the effect is negative and insignificant. We also find the R&D tax policy to have a positive and highly significant effect on firms’ export performance. The results are valid to sensitivity testing, and robust and consistent across alternative specifications and estimation methods. The findings show that South Africa’s R&D tax credit is highly effective in promoting investment on R&D in manufacturing firms, and positively affects firms’ export performance.Credit Cycles in Countries in the MENA Region — Do They Exist? Do They Matter?
Abstract
This paper will estimate private sector credit cycles for most of the oil-importing and oil-exporting countries in the Sub Saharan Africa. Credit cycles are the medium-term component in spectral analysis of real private sector credit growth. Besides, the paper estimates the credit cycles for several developed countries. The paper will test the hypothesis about the presence of substantial differences or similarities between credit cycles in the Sub Saharan Africa and advanced countries for the period 1964–2019. We find the credit cycles are associated with GDP growth and if it is synchronized across oil exporters and oil importers.The Globalization Conundrum Post COVID19: Internalizing the Risks of the Supply Chain
Abstract
In 2020, US and European firms have undertaken financial risk that they can ill-afford to carry stemming from their supply chain networks. Many have gradually deluded themselves into thinking their risk was reasonable, while other firms have made production sourcing decisions with little idea of the true magnitude of their risks. The rising risk was an inevitable consequence of the economy’s multinational firms spreading the supply chain further away from its home base. For the purposes of this paper, we consider risk associated with a transaction to be excessive when the domestic multinational is likely to incur a loss that will seriously compromise its production and sales and possibly force the firm into bankruptcy.In this paper, we examine an industrial structure resulting from the production shifting due to the traditional globalization model. We then introduce an increase in the external trade costs created by risks of extending the production location. The paper extends Krugman’s (1991) economic geography model. Our theoretical result are relevant to policymakers and multinational managers alike.
Discussant(s)
Marta Bengoa
,
City University of New York
William Charles Sawyer
,
Texas Christian University
Ahmed Rostom
,
World Bank
Amir Shoham
,
Temple University
JEL Classifications
- F2 - International Factor Movements and International Business
- F4 - Macroeconomic Aspects of International Trade and Finance