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Do R&D tax credits work? Evidence from an international panel of countries 1979-1994

Nicholas Bloom (), Rachel Griffith () and John van Reenen ()

No W99/08, IFS Working Papers from Institute for Fiscal Studies

Abstract: 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 (1979-1997). 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 per cent fall in the cost of R&D stimulates just over a 1 per cent rise in the level of R&D in the short-run; and just under a 10 per cent rise in R&D in the long-run.

JEL-codes: L12 O31 C25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-his and nep-tid
Date: 1999-11-01
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