Ackermann, Hagen
[VerfasserIn]
;
Fochmann, Martin
[Sonstige Person, Familie und Körperschaft];
Temme, Rebecca
[Sonstige Person, Familie und Körperschaft]
Behavioral Responses to Subsidies in Risky Investment Decisions and the Effectiveness of Tax Credits and Grants
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 4, 2018 erstellt
Beschreibung:
We provide evidence that subsidy types that are identical in monetary terms differ in their behavioral responses and consequently in their effectiveness. In particular, we observe that investments into a subsidized asset are higher under tax credit than under grant. Both subsidy types are essentially very similar, only the mechanism of the subsidy application is different. In case of a grant, an individual gains an amount of money. In case of a tax credit, no money is received directly, but the tax to be paid is decreased by the amount of the tax credit. Our results indicate that these mechanisms have a substantial impact on the effectiveness of subsidies. Applying our findings, governments can ‘nudge' the investors to support desired investment decisions by using a certain subsidy type. Particularly, our results suggest that when policymakers are indifferent from a budget perspective between providing a subsidy as a grant or as a tax credit, they should implement a tax credit