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An Evaluation of the French Innovation Tax Credit

Author

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  • Simon Bunel
  • Benjamin Hadjibeyli

Abstract

The Innovation tax credit (crédit d’impôt innovation, CII) is an extension of the Research tax credit (crédit d’impôt recherche, CIR) intended to boost the incentive effect of the latter on SMEs to encourage them to engage in the creation of new products via the development of prototypes or pilot plants. Introduced in 2013, it amounted to €120 million of tax credit in 2014 for some 5,300 recipients. This article seeks to measure the impact of the introduction of this scheme on its beneficiaries over the period from 2013 to 2016. Using a difference-in-differences method following propensity score matching, we find a greater increase in employment in the short term for firms benefiting from the scheme, along with a more pronounced increase in their sales turnover in the medium term. A greater increase in the number of new products produced by the beneficiaries is also observed. Finally, the introduction of the CII went along with a reduction in the research expenditure reported under the CIR.

Suggested Citation

  • Simon Bunel & Benjamin Hadjibeyli, 2022. "An Evaluation of the French Innovation Tax Credit," Working papers 887, Banque de France.
    • Handle: RePEc:bfr:banfra:887
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    More about this item

    Keywords

    Innovation; Tax credit; Evaluation; Products;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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