R&D Tax Policy During the 1980s: Success or Failure?
In: Tax Policy and the Economy, Volume 7
AbstractR&D; tax policy in the United States during the 1980s is evaluated, with particular emphasis placed on quantifying the impact of the R&D; tax credit on the R&D; investment of manufacturing firms. Using publicly available data on R&D; spending at the firm level, I estimate an average tax price elasticity for R&D; spending which is in the neighborhood of unity in the short run. Although the effective credit rate is small (less than five percent until 1990), this relatively strong price response means that the amount of additional R&D; spending thus induced was greater than the cost in foregone tax revenue. The recent evolution of features of the U.S. corporate tax system which affect R&D; is also reviewed and my results are compared with those of previous researchers. The conclusion is that the R&D; tax credit seems to have had the intended effect, although it took several years for firms to fully adjust. I also argue that although the high correlation over time of R&D; spending at the firm level makes it difficult to estimate long-run effects precisely, the same high correlation makes it probable that these effects are large.
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Other versions of this item:
- Hall, Bronwyn H., 1993. "R&D Tax Policy During the 1980s: Success of Failure?," Department of Economics, Working Paper Series qt8151h8tg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bronwyn H. Hall., 1993. "R&D Tax Policy During the 1980s: Success or Failure?," Economics Working Papers 93-208, University of California at Berkeley.
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- Rafal Kierzenkowski, 2009. "The Challenge of Restoring French Competitiveness," OECD Economics Department Working Papers 720, OECD Publishing.
- James R. Hines, Jr., 1995.
"Taxes, Technology Transfer, and the R&D Activities of Multinational Firms,"
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National Bureau of Economic Research, Inc.
- James R. Hines, Jr., 1995. "Taxes, Technology Transfer, and the R&D Activities of Multinational Firms," NBER Working Papers 4932, National Bureau of Economic Research, Inc.
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