Do R&D Credits Work? Evidence From A Panel Of Countries 1979-97
Nicholas Bloom (),
Rachel Griffith () and
John van Reenen ()
No 2415, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This paper examines the impact of fiscal incentives on the level of R&D investment. An econometric model of R&D investment is estimated using a new panel of data on tax changes and R&D spending in nine OECD countries over a nineteen-year period (1979-1996). We find evidence that tax incentives are effective in increasing R&D intensity. This is true even after allowing for permanent country specific characteristics, world macro shocks and other policy influences. We estimate that a 10% fall in the cost of R&D stimulates a 1% rise in the level of R&D in the short-run; R&D increases by just under 10% in the long-run. Additionally there is some evidence that changes in R&D tax credits affect decisions over the international location of R&D as suggested by models of tax competition.
Keywords: Panel Data; R&D; Tax Competition (search for similar items in EconPapers)
JEL-codes: C25 L13 O31 (search for similar items in EconPapers)
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