Tax incentives for R&D and firm dynamics (in Finnish with English abstract and summary)
AbstractWe compare different tax incentive schemes for private R&D investments using a numerical model of R&D-investments and firm dynamics. We find that tax incentives that are based on the incremental annual spending increase firms' R&D spending much more than tax incentives that are based on the level of R&D spending. However, incremental incentives also distort the allocation of R&D personnel across different firms much more than level-based tax incentives. This effect tends to lower aggregate output. We also find that whether the tax benefits are targeted to only profit-making firms, which pay corporate income tax, or given to all firms, does not make a big difference in terms of aggregate R&D spending or aggregate output.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1065.
Length: 23 pages
Date of creation: 2007
Date of revision:
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-14 (All new papers)
- NEP-INO-2007-01-14 (Innovation)
- NEP-PBE-2007-01-14 (Public Economics)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kaija Hyvönen-Rajecki).
If references are entirely missing, you can add them using this form.