Do tax incentives for research increase firm innovation? An RD design for R&D
Ralf Martin (),
Kieu-Trang Nguyen and
John van Reenen ()
No 230, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment
We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be prepolicy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme.
New Economics Papers: this item is included in nep-acc, nep-eur, nep-ino, nep-pbe and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
http://www.lse.ac.uk/GranthamInstitute/wp-content/ ... ezlepretre-et-al.pdf
Working Paper: Do Tax Incentives for Research Increase Firm Innovation? An RD Design for R&D (2016)
Working Paper: Do tax incentives for research increase firm innovation? An RD design for R&D (2016)
Working Paper: Do tax incentives for research increase firm innovation? An RD Design for RD (2016)
Working Paper: Do tax Incentives for Research Increase Firm Innovation? An RD Design for R&D (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:lsg:lsgwps:wp230
Access Statistics for this paper
More papers in GRI Working Papers from Grantham Research Institute on Climate Change and the Environment Contact information at EDIRC.
Series data maintained by The GRI Administration ().