A cost-benefit analysis of R&D tax incentives
AbstractAlthough technical knowledge generates spillover benefits, production of technical knowledge creates congestion externalities; thus, private R&D investment could be inefficient. A computable general equilibrium model is used to rank tax incentives by their effects on research effort and measure welfare effects. Five results stand out: R&D tax credits produce relatively large increases in research effort and welfare. Lower corporate income tax rates and ITCs for downstream users of high-tech production inputs rank second. Revenue losses from lower personal income tax rates can produce welfare losses. Ironically, ITCs for upstream producers of innovative inputs are ineffective. Incremental R&D credits dominate comprehensive credits.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 37 (2004)
Issue (Month): 2 (May)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
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