A cost-benefit analysis of R&D tax incentives

Benjamin Russo ()

Canadian Journal of Economics, 2004, vol. 37, issue 2, 313-335

Abstract: Although technical knowledge generates spillover benefits, production of technical knowledge creates congestion externalities; thus, private R&D investment could be inefficient. A computable general equilibrium model is used to rank tax incentives by their effects on research effort and measure welfare effects. Five results stand out: R&D tax credits produce relatively large increases in research effort and welfare. Lower corporate income tax rates and ITCs for downstream users of high-tech production inputs rank second. Revenue losses from lower personal income tax rates can produce welfare losses. Ironically, ITCs for upstream producers of innovative inputs are ineffective. Incremental R&D credits dominate comprehensive credits.

JEL-codes: E62 H21 O38 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (27)

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