Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Quebec

Rufin Baghana and Pierre Mohnen

No 2009-001, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: In this paper we evaluate the effectiveness of R&D tax incentives in Quebec, using manufacturing firm data from 1997 to 2003 originating from R&D surveys, annual surveys of manufactures and administrative data. The estimated price elasticity of R&D is -0.10 in the short run and -0.14 in the long run, with a slightly higher elasticities for small firms than for large firms. We show that there is a deadweight loss associated with level-based R&D tax incentives that is particularly acute for large firms. For small firms it is not sizeable enough to suppress the R&D additionality, at least not during quite a number of years after the initial tax change. Incremental R&D tax credits do not suffer from this deadweight loss and are from that perspective preferable to level-based tax incentives.

Keywords: R&D; tax credits; tax incentives; price elasticity; research and development; manufacturing industry; Quebec; Canada (search for similar items in EconPapers)
JEL-codes: C23 H25 H50 O32 O38 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

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Related works:
Journal Article: Effectiveness of R&D tax incentives in small and large enterprises in Québec (2009)
Working Paper: Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2009001

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