R&D Tax Credits across the European Union:Divergences and convergence

Laurence Jacquet and Stéphane Robin ()
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Stéphane Robin: CY Cergy Paris Université, THEMA

No 2021-14, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We examine the R&D, innovation and productivity effects of R&D tax credits (R&DTC) in 8 EU countries, in the context of a proposed EU-wide "super deduction" on R&D expenditures. Our econometric analysis, performed on industry-level panel data, shows that past R&D feeds current R&D, whether it is conducted under an R&DTC or not. Our estimate of additionality during an R&DTC phase is generally close to 1. R&D intensity also affects patenting intensity positively in Belgium, Czech Republic, France, Spain and the UK, but this relationship is R&DTC-related only in Belgium, France and Spain. Only in France and the UK do we observe a full (yet fragile) R&D – innovation – productivity relationship. In the UK, this relationship is not affected by the R&DTC scheme. In France, a 1% increase in R&D conducted under the second to fourth phases of R&DTC (1999-2017) entails a cumulated 0.37% increase in patenting intensity, which translates to a 0.16% increase in productivity. The main policy implication of these results is that a "super-deduction" on R&D is likely to help the EU reach its "R&D at 3% of GDP" objective, but only time will tell how generous it must be to really spur innovation and productivity.

Keywords: R&D Tax Credits; Public Support to R&D; Science and Technology Policy; European Policy (search for similar items in EconPapers)
JEL-codes: H25 H54 O38 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-eec, nep-eur, nep-ino, nep-pbe, nep-sbm and nep-tid
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Related works:
Working Paper: R&D Tax Credits across the European Union: Divergences and convergence (2022)
Working Paper: R&D Tax Credits across the European Union: Divergences and convergence (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2021-14

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