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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

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - UPEM - Université Paris-Est Marne-la-Vallée)

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.

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  • 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," Working Papers halshs-00674546, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00674546
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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

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    Cited by:

    1. Paulo G. Correa & Irem Guceri, 2013. "Tax Incentives for Research and Development," World Bank Publications - Reports 23659, The World Bank Group.
    2. Castellacci, Fulvio & Lie, Christine Mee, 2015. "Do the effects of R&D tax credits vary across industries? A meta-regression analysis," Research Policy, Elsevier, vol. 44(4), pages 819-832.
    3. 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.
    4. Elina Ladinska & Marielle Non & Bas Straathof, 2015. "More R&D with tax incentives? A meta-analysis," CPB Discussion Paper 309.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. A. Bozio & D. Irac & L. Py, 2014. "Impact of research tax credit on R&D and innovation: evidence from the 2008 French reform," Working papers 532, Banque de France.
    6. Laurence Jacquet & Stéphane Robin, 2021. "R&D Tax Credits across the European Union:Divergences and convergence," THEMA Working Papers 2021-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    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. Labeaga Azcona J. & Martínez-Ros E. & Mohnen P., 2014. "Tax incentives and firm size : effects on private R&D investment in Spain," MERIT Working Papers 2014-081, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Evens Salies, 2020. "L'impact du CIR sur les personnels de la recherche," Sciences Po publications 07/2020, Sciences Po.
    10. 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.
    11. 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).
    12. Busom, Isabel & Corchuelo, Beatriz & Martinez Ros, Ester, 2012. "Tax incentives or subsidies for R&D?," MERIT Working Papers 2012-056, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Montmartin, Benjamin & Herrera, Marcos & Massard, Nadine, 2018. "The impact of the French policy mix on business R&D: How geography matters," Research Policy, Elsevier, vol. 47(10), pages 2010-2027.
    14. Benjamin Montmartin & Marcos Herrera & Nadine Massard, 2017. "R&D policy regimes in France: New evidence from a spatio-temporal analysis," Working Papers hal-01559041, HAL.
    15. 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.
    16. 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).
    17. Pierre Möhnen, 2017. "Comment: Effectiveness of public support for R&D and entrepreneurship," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Études Économiques (INSEE), issue 493, pages 43-48.
    18. Evens Salies, 2020. "L’impact du CIR sur les personnels de la recherche," Documents de Travail de l'OFCE 2020-07, Observatoire Francais des Conjonctures Economiques (OFCE).
    19. 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 - Leibniz Centre for European Economic Research, number 111472.
    20. Martínez Ros, Ester & Corchuelo, Beatriz & Busom, Isabel, 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).
    21. World Bank, 2015. "Republic of Armenia Export-led Industrial Development Strategy," World Bank Publications - Reports 22273, The World Bank Group.
    22. Vincent Dortet-Bernadet & Michaël Sicsic, 2017. "The effect of R&D subsidies and tax incentives on employment: an evaluation for small firms in France," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Études Économiques (INSEE), issue 493, pages 5-22.
    23. Pöschel, Carla, 2020. "Incentive Effects of R&D Tax Incentives: A Meta-Analysis Focusing on R&D Tax Policy Designs," arqus Discussion Papers in Quantitative Tax Research 243, arqus - Arbeitskreis Quantitative Steuerlehre.
    24. Cameron Hepburn & Jacquelyn Pless & David Popp, 2018. "Policy Brief—Encouraging Innovation that Protects Environmental Systems: Five Policy Proposals," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 154-169.

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    Keywords

    tax credit; evaluation; research and development;
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