The effect of the incremental R&D tax credit on the private funding of R&D an econometric evaluation on french firm level data

Emmanuel Duguet

Revue d'économie politique, 2012, vol. 122, issue 3, 405-435

Abstract: We study, at the firm level, whether the incremental R&D tax credit increases the private funding of R&D. In order to answer this question, we use the yearly surveys of the Ministry of Research over the period 1993-2003, as well as the corresponding firm-level tax files. The main issue is whether the firms would have increased their R&D expenditures without this tax incentive. We make use of the Rubin methodology. In a first step, we study the determinants of the probability to benefit from the R&D tax credit, that is the selection process at work in the recipients? sample. We find that the probability to obtain a R&D tax credit increases with the R&D/Sales ratio and decreases with the direct R&D subsidies. Once we have evaluated the probability to get the R&D tax credit, we are able to correct for the selection bias. In a second step, we evaluate the effect of the incremental R&D tax credit on the private funding of research (once subtracted the direct subsidies from all the ministries). We find that, overall, the tax credit adds to the private funding of R&D : 1 Euro of tax credit would give slightly more than one Euro of total R&D. We also find that the incremental R&D tax credit increases the growth of the number of researchers.

Keywords: crédit d'impôt; évaluation; recherche et développement (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: THE EFFECT OF THE INCREMENTAL R&D TAX CREDIT ON THE PRIVATE FUNDING OF R&D: AN ECONOMETRIC EVALUATION ON FRENCH FIRM LEVEL DATA (2012)
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