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Do R&D Credits Work? Evidence From A Panel Of Countries 1979-97

  • Bloom, Nicholas
  • Griffith, Rachel
  • Van Reenen, John

This paper examines the impact of fiscal incentives on the level of R&D investment. An econometric model of R&D investment is estimated using a new panel of data on tax changes and R&D spending in nine OECD countries over a nineteen-year period (1979-1996). We find evidence that tax incentives are effective in increasing R&D intensity. This is true even after allowing for permanent country specific characteristics, world macro shocks and other policy influences. We estimate that a 10% fall in the cost of R&D stimulates a 1% rise in the level of R&D in the short-run; R&D increases by just under 10% in the long-run. Additionally there is some evidence that changes in R&D tax credits affect decisions over the international location of R&D as suggested by models of tax competition.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2415.

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Date of creation: Apr 2000
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Handle: RePEc:cpr:ceprdp:2415
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