We investigate the extent to which direct tax subsidies that lower the user cost of undertaking R&D (the "push" effect) and the overall competitiveness of the production tax system (the "pull" effect) independently impact upon aggregate R&D intensity across countries. The "push" effect of direct tax subsidies is measured by the after-tax user cost of R&D capital, and the "pull" effect of the production tax regime is measured by the effective tax rate on marginal production costs (ETRMC), which aggregates the marginal effective tax rates on production inputs (labour and capital) into an effective excise tax rate. A panel data set of nine countries over nineteen years is used to estimate a dynamic fixed effects model of aggregate R&D intensity. The short-run elasticity of the ratio of R&D to output with respect to the "push" effect of direct tax subsidies is significant, ranging from -0.15 to -0.22, while the long-run elasticity ranges from -0.46 to -0.77, depending upon the specification. The "pull" effect of the overall production tax system, as measured by the ETRMC, is significant as well, with the short-run elasticity ranging from -0.19 to -0.31 and the long-run elasticity from -0.58 to -0.93.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Department of Economics, University of Calgary in its series Working Papers with number
2007-19.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: