An Exploratory Analysis of Possible Effects of “Nudge” On Public Policies to Support Innovation in Brazil: The Case of Inovar-Auto Program

Abstract

This study presents a proposal to improve public policies for supporting innovation in Brazil’s automotive industry by using a conceptual model with incremental benefits based on nudge concepts. This new model aims to reduce the complexity of the current fiscal mechanism. It makes the tax incentive mechanism more dynamic and stimulates innovative companies to improve their innovative performance. For this, a qualitative comparative analysis of the effects (empirical and simulated) of a public innovation policy — an automotive policy called Inovar-Auto — compares a consolidated traditional tax incentive mechanism with the new model. It is concluded that the incremental scale of benefits stimulates the companies-government interaction more safely and effectively, reducing the complexity of the current tax incentive mechanism and offering new paths and choice possibilities. This study contributes to the literature by presenting an innovative tax incentive mechanism, a “nudge” for changing companies’ behavior, which can be applied in other countries.