Wage Subsidies, Slack Resources and Behavioural Additionality: Evidence from Universities

We examine the behavioural additionality effects of a wage subsidy in the form of a tax cut on R&D personnel's wages in a population of universities. How does university management use this wage subsidy? The wage subsidy is welcomed by universities as additional slack resources which are free to be used by university management. Its use depends on its degree of absorption and on it generates specific behavioural additionality effects. Wage subsidy resources are initially unabsorbed slack but over time increasingly function as absorbed slack because of the continuity and predictability of these resources. Different types of behavioural additionalities are generated at different impact levels. We find that initiatives at the organisational level are funded with absorbed slack, while initiatives at the project level are likely to be carried out with unabsorbed slack. The paper contributes to discussing slack resources in a non-profit setting and adds to the conceptual elucidation of behavioural additionality.