Optimal Taxation and R&D Policies

Ufuk Akcigit, Douglas Hanley and Stefanie Stantcheva

No 2016-031, Working Papers from Human Capital and Economic Opportunity Working Group

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; tax credit; subsidies; innovation; patents; research and development; r&d (search for similar items in EconPapers)
JEL-codes: H21 H23 H25 H32 O31 O32 O33 O38 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-dcm, nep-exp and nep-lab
Note: M
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Akcigi ... 2016_RD_Policies.pdf First version, November 28, 2016 (application/pdf)

Related works:
Journal Article: Optimal Taxation and R&D Policies (2022)
Working Paper: Optimal Taxation and R&D Policies (2016)
Working Paper: Optimal Taxation and R&D Policies (2016)
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:hka:wpaper:2016-031

Access Statistics for this paper

More papers in Working Papers from Human Capital and Economic Opportunity Working Group Contact information at EDIRC.
Bibliographic data for series maintained by Jennifer Pachon ().