American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers
American Economic Journal: Economic Policy
vol. 15,
no. 4, November 2023
(pp. 486–521)
Abstract
We present causal evidence of R&D tax incentives' positive impacts on a firm's own innovation and that of its technological neighbors. Exploiting a change in size-based eligibility thresholds for R&D tax relief, we implement a Regression Discontinuity Design using administrative data. We find significant effects of tax relief on (quality-adjusted) patenting (and R&D) that persist up to seven years, and evidence of R&D spillovers on the innovation of technologically close firms. We can rule out elasticities of patenting with respect to R&D user cost of under 2 at the 5 percent level and show that our large effects are driven by financially constrained treated firms.Citation
Dechezleprêtre, Antoine, Elias Einiö, Ralf Martin, Kieu-Trang Nguyen, and John Van Reenen. 2023. "Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers." American Economic Journal: Economic Policy, 15 (4): 486–521. DOI: 10.1257/pol.20200739Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
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