THE EFFECT OF THE INCREMENTAL R&D TAX CREDIT ON THE PRIVATE FUNDING OF R&D: AN ECONOMETRIC EVALUATION ON FRENCH FIRM LEVEL DATA

Emmanuel Duguet

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Abstract: We study, at the firm level, whether the incremental R&D tax credit increases the private funding of R&D. In order to answer this question, we use the yearly surveys of the Ministry of Research over the period 1993-2003, as well as the corresponding firm-level tax files. The main issue is whether the firms would have increased their R&D expenditures without this tax incentive. We make use of the Rubin methodology. In a first step, we study the determinants of the probability to benefit from the R&D tax credit, that is the selection process at work in the recipients' sample. We find that the probability to obtain a R&D tax credit increases with the R&D/Sales ratio and decreases with the direct R&D subsidies. Once we have evaluated the probability to get the R&D tax credit, we are able to correct for the selection bias. In a second step, we evaluate the effect of the incremental R&D tax credit on the private funding of research (once subtracted the direct subsidies from all the ministries). We find that, overall, the tax credit adds to the private funding of R&D: 1 Euro of tax credit would give slightly more than one Euro of total R&D. We also find that the incremental R&D tax credit increases the growth of the number of researchers.

Keywords: tax credit; evaluation; research and development (search for similar items in EconPapers)
Date: 2012-01-01
New Economics Papers: this item is included in nep-ino and nep-pbe
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Citations: View citations in EconPapers (41)

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Journal Article: The effect of the incremental R&D tax credit on the private funding of R&D an econometric evaluation on french firm level data (2012)
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