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The Effects of R&D Tax Credits and Subsidies onPrivate R&D in Mexico (Chapter 2)

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  • Emmanuel Chavez

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

This research studies the effects of a R&D tax credit and a R&D subsidy in Mexico.The Mexican tax credit removed the usual market oriented traits that define most taxcredits. It essentially acted as a "deferred" subsidy, as firms got a discount on theircorporate tax at the end of the fiscal year. Whereas the subsidy granted the funds atthe start of the R&D project. My estimates show that both policies had a positive im-pact on innovation personnel, but the subsidy's impact was larger. As for patents, theimpacts are less clear but favor the subsidy over the tax credit. The subsidy appearsto have allowed less profitable firms to take on their R&D projects. This might havedriven the larger subsidy effects. The awarding procedure in both programs is similar.Firms submitted their R&D projects to a non tax collecting institution. The projectswere evaluated according to detailed guidelines. The awarded projects were selectedbased on the evaluations. The guidelines allow to construct a set of conditioning vari-ables in a matching estimation approach. In addition, I use the difference-in-differencematching method to purge time-invariant unobservables.

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  • Emmanuel Chavez, 2020. "The Effects of R&D Tax Credits and Subsidies onPrivate R&D in Mexico (Chapter 2)," Working Papers halshs-02652063, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02652063
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02652063v3
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    R&D; Innovation; Propensity Score Matching; Public Policy;
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