R&D Tax Credits across the EU: Nonsense or Common Sense? A Dynamic Panel Data Approach

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

No 2025-09, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We re-examine the R&D - innovation - productivity nexus in 8 EU countries in the context of a possible EU-wide "super deduction" on R&D expenditures, using panels of industries with a long time dimension. We introduce dynamics in the innovation production function and extended production function models, taking the availability/unavailability of R&D tax credits (R&DTC) into account. Our benchmark estimates, obtained with panel ARDL models, yield positive longrun elasticities of innovation and productivity with respect to R&D intensity. R&D conducted under an R&DTC either reinforces an already-existing positive elasticity or makes it significantly positive if it was not before. Disentangling the respective effects of ’pure’ business R&D and of government-supported R&D reveals a wider diversity of situations, however. The effect of R&DTC is less often significant, sometimes superseded by other forms of public support to R&D. The main policy implication of these results is that a harmonized "super-deduction" on R&D at the EU level may be slightly premature. Complementary analyses suggest that targeting specific industries may make such a policy more effective and accurate.

Keywords: Innovation; Productivity; Dynamic Panel Data Models; Public Support to R&D; European Science and Technology Policy (search for similar items in EconPapers)
JEL-codes: H25 H54 O30 O38 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://thema.u-cergy.fr/IMG/pdf/2025-09.pdf (application/pdf)

Related works:
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:ema:worpap:2025-09

Access Statistics for this paper

More papers in THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise Contact information at EDIRC.
Bibliographic data for series maintained by Stefania Marcassa ( this e-mail address is bad, please contact ).