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R&D Tax Credits across the European Union : Divergences and convergence

Author

Listed:
  • Laurence Jacquet

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Stéphane Robin

    (PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne)

Abstract

We examine the R&D, innovation and productivity effects of R&D tax credits (R&DTC) in 8 EU countries in the context of a proposed EU-wide "super deduction" on R&D expenditures. Esti- mating CDM-type econometric models on industry-level panel data, we find that past R&D sys- tematically feeds current R&D. The estimate of our proxy measure of input additionality during an R&DTC phase is generally close to 1, but rarely larger than 1. R&D intensity affects patenting intensity positively in Belgium, Czech Republic, France, Spain and the UK, but this relationship is R&DTC-related only in Belgium, France and Spain. Only in France and the UK do we observe a full R&D - innovation - productivity relationship. In the UK, this relationship is not affected by the R&DTC scheme. In France, a 1% increase in R&D conducted under the second to fourth phases of R&DTC (1999-2017) entails a cumulated 0.36% increase in patenting intensity, which translates to a 0.16% increase in productivity. The main policy implication of our results is that R&DTC may help the EU reach its "R&D at 3% of GDP" objective, but should not be the only instrument implemented to spur innovation and productivity in the EU.

Suggested Citation

  • Laurence Jacquet & Stéphane Robin, 2022. "R&D Tax Credits across the European Union : Divergences and convergence," Working Papers hal-03691981, HAL.
    • Handle: RePEc:hal:wpaper:hal-03691981
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    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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