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Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms

Author

Listed:
  • Petr Hanel

    (GREDI, Département d'économique, Université de Sherbrooke)

  • Dirk Czarnitzki

    (Centre for European Economic Research (ZEW), Dept. of Industrial Economics and International Management)

  • Julio Miguel Rosa

    (Statistics Canada)

Abstract

This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997-1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as number of new products, sales with new products, originality of innovation etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits increase the R&D engagement at the firm level and that the R&D activities induced by fiscal incentives lead to additional innovation output.

Suggested Citation

  • Petr Hanel & Dirk Czarnitzki & Julio Miguel Rosa, 2005. "Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms," Cahiers de recherche 05-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    • Handle: RePEc:shr:wpaper:05-01
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    References listed on IDEAS

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    More about this item

    Keywords

    R&D; Innovation; Public Subsidies; Tax Credit; Policy Evaluation.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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