 R&D tax credits and innovationWalter Melnik and Andrew Smyth Journal of Public Economics, 2024, vol. 236, issue C Abstract: Previous work suggests that research and development (R&D) tax credits increase R&D expenditure. We exploit the staggered adoption of state-level R&D tax credits in the United States to examine their effect on innovation itself. In particular, we consider ten commonly-studied patent characteristics that have received little or no attention in the extant literature on R&D incentives. Our empirical approach suggests that R&D tax credits reduce the user cost of R&D and increase R&D expenditure, but we find no aggregate evidence that such credits increase patenting in credit-adopting states. Nor do credits increase the scientific quality of patents, as captured by patent citations. On the other hand, R&D tax credits increase patent novelty and we see large and significant increases in the market value of patents in credit-adopting states. All of our aggregate results are driven by states with larger effective credits and by larger firms, because such firms produce the vast majority of patents. These results have important implications for R&D public policy. Keywords: Research and development; Innovation; Patents; Tax credits; State taxation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:236:y:2024:i:c:s0047272724000938 DOI: 10.1016/j.jpubeco.2024.105157 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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