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Accelerating Innovation: National R&D Subsidies versus Foreign R&D Tax Credits

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Author Info

  • Felipa de Mello-Sampayo

    (ISCTE - Department of Economics and UNIDE-ERC)

  • Sofia de Sousa-Vale

    ()
    (ISCTE - Department of Economics and UNIDE-ERC)

  • Francisco Camões

    (ISCTE - Department of Economics and UNIDE-ERC)

Abstract

This paper examines and compares the impact on growth of government’s funding national R&D or providing a tax rate reduction for foreign investment in R&D. In an innovationbased model we show the relation between the costs of these two policies. One meaningful policy implication of our results is that, to accelerate innovation, governments should adopt a tax rate deduction for foreign R&D, rather than subsidizing national R&D, because the former is more economical and effective than the latter.

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File URL: http://bru-unide.iscte.pt/RePEc/pdfs/ERCwp0108.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by ISCTE-IUL, Business Research Unit (BRU-IUL) in its series Working Papers Series 1 with number ercwp0108.

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Length: 15 pages
Date of creation: 15 Jun 2007
Date of revision:
Handle: RePEc:isc:iscwp1:ercwp0108

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Web page: http://bru-unide.iscte.pt/
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Related research

Keywords: Endogenous Growth; Foreign Direct Investment; Taxes;

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References

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  1. Reis, Ana Balcao, 2006. "Welfare, taxes and foreign investment," Journal of Economic Dynamics and Control, Elsevier, vol. 30(6), pages 1045-1061, June.
  2. V N Balasubramanyam & M Salisu & David Sapsford., . "Foreign Direct Investment and Growth in EP and IS Countries," Working Papers ec18/94, Department of Economics, University of Lancaster.
  3. Elberfeld Walter & Götz Georg & Stähler Frank, 2005. "Vertical Foreign Direct Investment, Welfare, and Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-30, February.
  4. Nicholas Bull, 1993. "When all the optimal dynamic taxes are zero," Working Paper Series / Economic Activity Section 137, Board of Governors of the Federal Reserve System (U.S.).
  5. Robert C. Feenstra, 1990. "Trade and Uneven Growth," NBER Working Papers 3276, National Bureau of Economic Research, Inc.
  6. Balcao Reis, Ana, 2001. "On the welfare effects of foreign investment," Journal of International Economics, Elsevier, vol. 54(2), pages 411-427, August.
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Cited by:
  1. Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camões & Orlando Gomes, 2010. "Proteccionism under R&D Policy: Innovation Rate and Welfare," Working Papers Series 1 ercwp0210, ISCTE-IUL, Business Research Unit (BRU-IUL).

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