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The effect of the incremental R&D tax credit on the private funding of R&D an econometric evaluation on french firm level data

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  • Emmanuel Duguet

Abstract

We 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.

Suggested Citation

  • 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.
  • Handle: RePEc:cai:repdal:redp_223_0405
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    References listed on IDEAS

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    9. Emmanuel Duguet & Isabelle Kabla, 1998. "Appropriation Strategy and the Motivations to Use the Patent System: An Econometric Analysis at the Firm Level in French Manufacturing," Annals of Economics and Statistics, GENES, pages 289-327.
    10. Emmanuel Duguet, 2004. "Are RαD subsidies a substitute or a complement to privately funded RαD ?. An econometric analysis at the firm level," Revue d'économie politique, Dalloz, vol. 114(2), pages 245-274.
    11. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, pages 449-469.
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    Blog mentions

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    1. Les crédits d’impôt stimulent-ils la recherche-développement ?
      by ? in D'un champ l'autre on 2015-01-19 18:36:00

    Citations

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    Cited by:

    1. Montmartin, B. & Herrera, M. & Massard, N., 2015. "R&D policies in France: New evidence from a NUTS3 spatial analysis," Working Papers 2015-11, Grenoble Applied Economics Laboratory (GAEL).
    2. Paulo G. Correa & Irem Guceri, 2013. "Tax Incentives for Research and Development," World Bank Other Operational Studies 23659, The World Bank.
    3. World Bank, 2015. "Republic of Armenia Export-led Industrial Development Strategy," World Bank Other Operational Studies 22273, The World Bank.
    4. Loriane Py & Antoine Bozio & Delphine Irac, 2014. "Impact of research tax credit on R&D and innovation: evidence from the 2008 French reform," EcoMod2014 6873, EcoMod.
    5. Benjamin Montmartin & Marcos Herrera & Nadine Massard, 2017. "R&D Policy regimes in France: New Evidence from a spatio-temporal Analysis," GREDEG Working Papers 2017-22, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    6. Daniel Gama e Colombo, 2016. "Impact Assessment of Tax Incentives to Foster Industrial Innovation in Brazil: The Case of Law 11,196/05," Working Papers, Department of Economics 2016_30, University of São Paulo (FEA-USP).
    7. Evens Salies, 2017. "Etudes d’impact du crédit d’impôt recherche (CIR): Une revue de la littérature," Sciences Po publications info:hdl:2441/59b98fs2bu8, Sciences Po.
    8. Loriane Py & Antoine Bozio & Delphine Irac, 2014. "Impact of research tax credit on R&D and innovation: evidence from the 2008 French reform," EcoMod2014 6873, EcoMod.
    9. Castellacci, Fulvio & Lie, Christine Mee, 2015. "Do the effects of R&D tax credits vary across industries? A meta-regression analysis," Research Policy, Elsevier, pages 819-832.
    10. Castellacci, Fulvio & Lie, Christine Mee, 2015. "Do the effects of R&D tax credits vary across industries? A meta-regression analysis," Research Policy, Elsevier, pages 819-832.
    11. Busom, Isabel & Corchuelo, Beatriz & Martinez Ros, Ester, 2012. "Tax incentives or subsidies for R&D?," MERIT Working Papers 056, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Martínez Ros, Ester & Busom, Isabel & Corchuelo, Beatriz, 2011. "Tax incentives and direct support for R&D : what do firms use and why?," INDEM - Working Paper Business Economic Series id-11-03, Instituto para el Desarrollo Empresarial (INDEM).
    13. Köhler, Christian & Larédo, Philippe & Rammer, Christian, 2012. "Fiscal incentives for business R&D: Compendium of evidence on the effectiveness of innovation policy intervention," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 111472.
    14. Isabel Bodas Freitas & Fulvio Castellacci & Roberto Fontana & Franco Malerba & Andrea Vezzulli, 2015. "The additionality effects of R&D tax credits across sectors: A cross-country microeconometric analysis," Working Papers on Innovation Studies 20150424, Centre for Technology, Innovation and Culture, University of Oslo.
    15. Elina Ladinska & Marielle Non & Bas Straathof, 2015. "More R&D with tax incentives? A meta-analysis," CPB Discussion Paper 309, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Aristei, David & Sterlacchini, Alessandro & Venturini, Francesco, 2015. "The effects of public supports on business R&D: firm-level evidence across EU countries," MPRA Paper 64611, University Library of Munich, Germany.

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