Effect of R&D Tax Credits for Small and Medium-sized Enterprises in Japan: Evidence from firm-level data
AbstractAlthough numerous studies have evaluated the effect of tax credits on R&D, many have neglected the problem of selection bias. Furthermore, empirical studies have found that Japan's total factor productivity (TFP) growth has slowed since the 1990s, and Kim et al. (2010) have attributed this slowdown partly to low R&D expenditures among small and medium-sized enterprises (SME). Evidence suggests that enhancing R&D among small firms is essential for Japan's economic growth. This paper estimates the effect of R&D tax credits for SMEs using firm-level micro data from "The 2009 Basic Survey of Small and Medium Enterprises." We use the propensity score method introduced by Rubin (1974), in which recipients of tax credits are matched with the most similar non-recipients. Empirical results show that R&D tax credits induce an increase in SMEs' R&D expenditures. Moreover, we find that the effect of R&D tax credits on liquidity-constrained firms is much greater than on firms without liquidity constraints.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11066.
Length: 31 pages
Date of creation: Sep 2011
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-01 (All new papers)
- NEP-ENT-2011-10-01 (Entrepreneurship)
- NEP-INO-2011-10-01 (Innovation)
- NEP-PBE-2011-10-01 (Public Economics)
- NEP-SBM-2011-10-01 (Small Business Management)
- NEP-TID-2011-10-01 (Technology & Industrial Dynamics)
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- Hiroyuki Kasahara & Katsumi Shimotsu & Michio Suzuki, 2013. "Does an R&D Tax Credit Affect R&D Expenditure? The Japanese R&D Tax Credit Reform in 2003," CESifo Working Paper Series 4451, CESifo Group Munich.
- Hiroyuki Kasahara & Katsumi Shimotsu & Michio Suzuki, 2012.
"Does an R&D Tax Credit Affect R&D Expenditure? The Japanese Tax Credit Reform in 2003,"
Global COE Hi-Stat Discussion Paper Series
gd11-220, Institute of Economic Research, Hitotsubashi University.
- Hiroyuki Kasahara, & Katsumi Shimotsu & Michio Suzuki, 2012. "Does an R&D Tax Credit Affect R&D Expenditure? The Japanese Tax Credit Reform in 2003," CARF F-Series CARF-F-275, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Oct 2013.
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