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The Effectiveness of R&D Tax Credits

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  • Russell Thomson

    (Swinburne University of Technology)

Abstract

In order to measure the effect of tax credits on private R&D investment, researchers confront the difficult problem of finding an exogenous measure of tax policy that exhibits sufficient variation to support robust identification. This paper takes a new approach based on exploiting differences in the average capital-labor ratio of R&D investment across industries and variation in the tax treatment of different expenditure types across countries and over time. The estimated short-run elasticity is 0.50 which is somewhat more than double previous estimates derived from cross-country analysis.

Suggested Citation

  • Russell Thomson, 2017. "The Effectiveness of R&D Tax Credits," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 544-549, July.
    • Handle: RePEc:tpr:restat:v:99:y:2017:i:3:p:544-549
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00559
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