Accelerating Innovation: National R&D Subsidies versus Foreign R&D Tax Credits

Felipa De Mello-Sampayo, Sofia de Sousa-Vale () and Francisco Camões
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Sofia de Sousa-Vale: ISCTE - Department of Economics and UNIDE-ERC
Francisco Camões: ISCTE - Department of Economics and UNIDE-ERC

No ercwp0108, Working Papers Series 1 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: This paper examines and compares the impact on growth of government’s funding national R&D or providing a tax rate reduction for foreign investment in R&D. In an innovationbased model we show the relation between the costs of these two policies. One meaningful policy implication of our results is that, to accelerate innovation, governments should adopt a tax rate deduction for foreign R&D, rather than subsidizing national R&D, because the former is more economical and effective than the latter.

Keywords: Endogenous Growth; Foreign Direct Investment; Taxes (search for similar items in EconPapers)
JEL-codes: F21 H21 O40 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2007-06-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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