Taxes, Innovation and Productivity

James Cloyne, Joseba Martinez, Haroon Mumtaz and Paolo Surico
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Haroon Mumtaz: School of Economics and Finance, Queen Mary, University of London

No 979, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Using a narrative identi cation of tax changes in the United States over the post-WWII period, we document that a temporary cut in corporate income tax rates leads to a long-lasting increase in innovation and productivity, whereas changes in personal income tax rates only have short-term e ects. We show that the results on corporate taxes are consistent with theories of endogenous growth that feature tax amortisation allowances on intellectual property purchases, as in the tax code of most countries in the world. In contrast, personal taxes work primarily through the response of labour supply, which is as transient as the tax change itself.

Keywords: corporate taxes; narrative identi cation; TFP; R&D; technological adoption. (search for similar items in EconPapers)
JEL-codes: E23 E62 O32 O34 O38 (search for similar items in EconPapers)
Date: 2024-04-22
New Economics Papers: this item is included in nep-acc, nep-ino, nep-pbe, nep-pub and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:979

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