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Developing countries often employ tax incentives to promote investment; however, evidence on their productivity impact is scarce. I use a matched difference-in-difference approach and a panel dataset of Thai firms to investigate the impact of investment tax incentives on firms’ productivity and illustrate how it varies across firms in different competition environments. I find that the incentives significantly raise productivity for the treated firms relative to the control firms. I also show that the incentives could boost productivity to a larger extent when targeted towards higher-competition sectors.

Investment tax incentives and firm productivity: evidence from Thailand