EconPapers    
Economics at your fingertips  
 

Optimal Taxation and R&D Policies

Ufuk Akcigit (), Douglas Hanley () and Stefanie Stantcheva

No 11682, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the optimal design of R&D policies and corporate taxation when the outputs of innovation are not appropriable in the absence of intellectual property rights policies and there are non-internalized technology spillovers across firms. Firms are heterogeneous in their research productivity, i.e., in the efficiency with which they convert a given set of R&D inputs into successful innovations. There is asymmetric information about firm productivity and about its stochastic evolution over time that prevents the first best solution to the technology spillover. The problem is thus posed as one of dynamic mechanism design with externalities. We characterize the optimal constrained efficient allocations over firms' life cycles and for firms of different productivities. We show that the constrained efficient allocations can be implemented either by a patent system plus a price subsidy for the monopolists' products, together with a parsimonious R&D subsidy function or, equivalently, by a prize mechanism. We estimate our model using firm-level data matched to patent data and quantify the optimal policies. Simpler innovation policies, such as linear R&D subsidies and linear profit taxes, lead to large revenue losses relative to the optimal mechanism.

Keywords: Corporate taxation; innovation; patents; R&D; Subsidies; Tax credits (search for similar items in EconPapers)
JEL-codes: H21 H23 H25 H32 O31 O32 O33 O38 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pbe, nep-pub and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11682 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Optimal Taxation and R&D Policies (2016) Downloads
Working Paper: Optimal Taxation and R&D Policies (2016) Downloads
Working Paper: Optimal Taxation and R&D Policies (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11682

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=11682

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2020-03-29
Handle: RePEc:cpr:ceprdp:11682