The Effect Of The Incremental R&D Tax Credit On The Private Funding Of R&D: An Econometric Evaluation On French Firm Level Data
AbstractWe study, at the firm level, whether the incremental R&D tax credit increases the private funding of R&D. In order to answer this question, we use the yearly surveys of the Ministry of Research over the period 1993-2003, as well as the corresponding firm-level tax files. The main issue is whether the firms would have increased their R&D expenditures without this tax incentive. We make use of the Rubin methodology. In a first step, we study the determinants of the probability to benefit from the R&D tax credit, that is the selection process at work in the recipients' sample. We find that the probability to obtain a R&D tax credit increases with the R&D/Sales ratio and decreases with the direct R&D subsidies. Once we have evaluated the probability to get the R&D tax credit, we are able to correct for the selection bias. In a second step, we evaluate the effect of the incremental R&D tax credit on the private funding of research (once subtracted the direct subsidies from all the ministries). We find that, overall, the tax credit adds to the private funding of R&D: 1 Euro of tax credit would give slightly more than one Euro of total R&D. We also find that the incremental R&D tax credit increases the growth of the number of researchers.
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Date of creation: 01 Jan 2012
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tax credit; evaluation; research and development;
Other versions of this item:
- Emmanuel Duguet, 2012. "The effect of the incremental R&D tax credit on the private funding of R&D an econometric evaluation on french firm level data," Revue d'économie politique, Dalloz, vol. 122(3), pages 405-435.
- NEP-ALL-2012-03-08 (All new papers)
- NEP-INO-2012-03-08 (Innovation)
- NEP-PBE-2012-03-08 (Public Economics)
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