Tax Credits and Small Firm R&D Spending

Ajay Agrawal, Carlos Rosell and Timothy Simcoe

American Economic Journal: Economic Policy, 2020, vol. 12, issue 2, 1-21

Abstract: In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference-in-difference estimates show a 17 percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.

JEL-codes: D22 G32 H25 L25 O32 O38 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (29)

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DOI: 10.1257/pol.20140467

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