The Fiscal Returns of Productive Development Programs

Abstract

This paper provides evidence that Productive Development Programs (PDPs) generate considerable fiscal returns through increased tax contributions from participating firms. Using firm-level data from a Colombian census-type manufacturing survey during 2006–2018, we implement a difference-in-differences approach with multiple time periods to estimate the impact of PDP participation on firms’ tax payments. We find that participation leads to an aggregate increase in total tax contributions of approximately 218 million COP (~50,000 USD) per firm across all post-treatment periods, with effects primarily driven by direct rather than indirect taxation, and mediation analysis suggesting they mostly occur through sales and employment increments. The effects emerge quickly and persist over time, suggesting PDPs create lasting improvements in firm performance that translate into sustained fiscal benefits. These findings indicate that PDPs may be more financially sustainable than previously recognized, while also providing concrete evidence of fiscal returns that can help maintain support for such programs.