Taxation and R&D: An Investigation of the Push and Pull Effects

Kenneth McKenzie and Natalia Sershun

Canadian Public Policy, 2010, vol. 36, issue 3, 307-324

Abstract: We in vestigate the extent of the impact that direct tax subsidies (the "push" effect) and the competitiveness of the production tax system (the "pull" effect) have on research and development. A panel dataset of nine countries over nineteen years is used to estimate a dynamic fixed effects model of aggregate R&D. Both effects are significant and economically important. The short-run elasticity of R&D with respect to the push effect ranges from -0.12 to -0.22, while the long-run elasticity ranges from -0.46 to -0.83; the short-run elasticity of the pull effect ranges from -0.15 to -0.28, while the long-run elasticity ranges from -0.58 to -0.83.

Date: 2010
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