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Optimal Taxation and R&D Policies

Stefanie Stantcheva

No 1533, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We study the optimal design of firm taxation and R&D subsidies in a dynamic model in which the returns to R&D investment by firms are heterogeneous across firms and uncertain over time. A firm's quality and risky returns are private information. We use a mechanism design approach to solve for the optimal taxation of firms and R&D policies over the firms' life cycle. We highlight the crucial parameters and elasticities that determine the sign and magnitude of the optimal policies. We calibrate the model to U.S. firm data to quantitatively illustrate the evolution of the optimal taxes and subsidies over firms' life cycles. Finally, we evaluate the performance of simpler tax and subsidy instruments, namely linear taxes and R&D subsidies, size-dependent, or firm age-dependent policies.

Date: 2015
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Working Paper: Optimal Taxation and R&D Policies (2016) Downloads
Working Paper: Optimal Taxation and R&D Policies (2016) Downloads
Working Paper: Optimal Taxation and R&D Policies (2016) Downloads
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