Profit Taxation, R&D Spending, and Innovation

Andreas Lichter (), Max Löffler, Ingo E. Isphording (), Thu-Van Nguyen (), Felix Poege () and Sebastian Siegloch
Additional contact information
Andreas Lichter: DICE and HHU Düsseldorf
Ingo E. Isphording: IZA – Institute for Labor Economics
Thu-Van Nguyen: Stifterverband Essen
Felix Poege: Technology & Policy Research Initiative, Boston University and Max Planck Institute for Innovation and Competition

No 202, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study how business taxes affect establishments’ R&D activities. Relying on geocoded panel data targeting the universe of R&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987 2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments’ total R&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R&D inputs, among establishment characteristics, and for different types of research projects.

Keywords: corporate taxation; firms; R&D; innovation; patents (search for similar items in EconPapers)
JEL-codes: H25 H32 O31 O32 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-09
New Economics Papers: this item is included in nep-acc, nep-eur, nep-ino, nep-pbe, nep-ppm, nep-pub, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_202_2022.pdf First version, 2022 (application/pdf)

Related works:
Journal Article: Profit Taxation, R&D Spending, and Innovation (2025)
Working Paper: Profit Taxation, R&D Spending, and Innovation (2021)
Working Paper: Profit Taxation, R&D Spending, and Innovation (2021)
Working Paper: Profit taxation, R&D spending, and innovation (2021)
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