Modeling R&D spillovers to productivity: The effects of tax credits

T. von Brasch, Ådne Cappelen, Håvard Hungnes and Terje Skjerpen

Economic Modelling, 2021, vol. 101, issue C

Abstract: How much stimuli that should be attributed to R&D investments crucially depends on how the benefits of R&D reverberate throughout the economy. An extensive literature has found major spillover effects from R&D investments from one industry to another. Using a macroeconomic model for a small open economy, we analyze how tax credits stimulate R&D through the user cost of capital and how it impacts the economy in general via knowledge flows from R&D capital. We find that a tax credit scheme that lowers the user cost of R&D capital, leads to a gradual increase in aggregate productivity. In the long run, the levels of output, real wages, and consumption are around one percent higher than the baseline.

Keywords: R&D spillovers; Total factor productivity; Innovation policies; Macrodynamics (search for similar items in EconPapers)
JEL-codes: C32 C51 D24 E17 O32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:101:y:2021:i:c:s0264999321001346

DOI: 10.1016/j.econmod.2021.105545

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