Tax Incentives, On-the-job Training, and Human Capital Accumulation: Evidence from China

This study investigates the effects of an increase in the proportion of tax credit (IPTC) policy on firms' on-the-job-training expenses. We document that the IPTC significantly increases on-the-job training expenses; the result remains valid after a series of robustness tests. An analysis of heterogeneous effects shows that privately owned firms and small-scale firms are more susceptible to the IPTC's impacts than state-owned and large-scale firms. Finally, we find that the IPTC can improve the production efficiency of firms and promote firm performance and innovation.