IDEAS home Printed from https://ideas.repec.org/p/iae/iaewps/wp2013n18.html

Some searches may not work properly. We apologize for the inconvenience.

   My bibliography  Save this paper

The Effectiveness of R&D Tax Credits: Cross-Industry Evidence

Author

Listed:
  • Russell Thomson

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper presents new estimates of the efficacy of R&D tax incentives using cross-countrycross-industry data and a novel measure of tax policy that incorporates differences in the average capital–labour ratio in R&D investment across industries and variation in the tax treatment of different expenditure types across countries and over time. The results suggest that, in the short run, industry increases R&D investment by 0.24 dollars for every dollar of tax revenue forgone. The results appear to be more robust than estimates based on crosscountry or firm-level data.

Suggested Citation

  • Russell Thomson, 2013. "The Effectiveness of R&D Tax Credits: Cross-Industry Evidence," Melbourne Institute Working Paper Series wp2013n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2013n18
    as

    Download full text from publisher

    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2013n18.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Russell Thomson, 2010. "Tax Policy and R&D Investment by Australian Firms," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 260-280, June.
    2. Martin Falk, 2006. "What drives business Research and Development (R&D) intensity across Organisation for Economic Co-operation and Development (OECD) countries?," Applied Economics, Taylor & Francis Journals, vol. 38(5), pages 533-547.
    3. Russell Thomson, 2013. "Measures of R&D Tax Incentives for OECD Countries," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
    4. Daniel J. Wilson, 2009. "Beggar Thy Neighbor? The In-State, Out-of-State, and Aggregate Effects of R&D Tax Credits," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 431-436, May.
    5. Bronwyn Hall, 1992. "R&D Tax Policy During the Eighties: Success or Failure?," NBER Working Papers 4240, National Bureau of Economic Research, Inc.
    6. Dominique Guellec & Bruno Van Pottelsberghe De La Potterie, 2003. "The impact of public R&D expenditure on business R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(3), pages 225-243.
    7. Bloom, Nick & Griffith, Rachel & Van Reenen, John, 2002. "Do R&D tax credits work? Evidence from a panel of countries 1979-1997," Journal of Public Economics, Elsevier, vol. 85(1), pages 1-31, July.
    8. Goolsbee, Austan, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," American Economic Review, American Economic Association, vol. 88(2), pages 298-302, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Minniti & F. Venturini, 2014. "R&D Policy and Schumpeterian Growth: Theory and Evidence," Working Papers wp945, Dipartimento Scienze Economiche, Universita' di Bologna.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Russell Thomson & Paul Jensen, 2013. "The Effects of Government Subsidies on Business R&D Employment: Evidence From Oecd Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 281-310, June.
    2. Montmartin, Benjamin & Herrera, Marcos, 2015. "Internal and external effects of R&D subsidies and fiscal incentives: Empirical evidence using spatial dynamic panel models," Research Policy, Elsevier, vol. 44(5), pages 1065-1079.
    3. Holt, Jared & Skali, Ahmed & Thomson, Russell, 2021. "The additionality of R&D tax policy: Quasi-experimental evidence," Technovation, Elsevier, vol. 107(C).
    4. Mellace, Giovanni & Ventura, Marco, 2019. "Intended and unintended effects of public incentives for innovation. Quasi-experimental evidence from Italy," Discussion Papers on Economics 9/2019, University of Southern Denmark, Department of Economics.
    5. A. Minniti & F. Venturini, 2014. "R&D Policy and Schumpeterian Growth: Theory and Evidence," Working Papers wp945, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Russell Thomson, 2010. "Tax Policy and R&D Investment by Australian Firms," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 260-280, June.
    7. Boris Lokshin & Pierre Mohnen, 2012. "How effective are level-based R&D tax credits? Evidence from the Netherlands," Applied Economics, Taylor & Francis Journals, vol. 44(12), pages 1527-1538, April.
    8. Mellace, Giovanni & Ventura, Marco, 2023. "The short-run effects of public incentives for innovation in Italy," Economic Modelling, Elsevier, vol. 120(C).
    9. Minford, Lucy & Meenagh, David, 2019. "Testing a model of UK growth: A role for R&D subsidies," Economic Modelling, Elsevier, vol. 82(C), pages 152-167.
    10. Beck, Mathias & Junge, Martin & Kaiser, Ulrich, 2017. "Public Funding and Corporate Innovation," IZA Discussion Papers 11196, Institute of Labor Economics (IZA).
    11. Nicholas Bloom & John Van Reenen & Heidi Williams, 2019. "A toolkit of policies to promote innovation," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 10.
    12. Dechezlepretre, Antoine & Einiö, Elias & Martin, Ralf & Nguyen, Kieu-Trang & Reenen, John Van, 2016. "Do tax incentives for research increase firm innovation? An RD design for R&D, patents and spillovers," LSE Research Online Documents on Economics 66428, London School of Economics and Political Science, LSE Library.
    13. Schwab, Thomas & Todtenhaupt, Maximilian, 2016. "Spillover from the haven: Cross-border externalities of patent box regimes within multinational firms," ZEW Discussion Papers 16-073, ZEW - Leibniz Centre for European Economic Research.
    14. Andrés Rodríguez-Pose & Callum Wilkie, 2016. "Context and the role of policies to attract foreign R&D in Europe," European Planning Studies, Taylor & Francis Journals, vol. 24(11), pages 2014-2035, November.
    15. Russell Thomson, 2013. "Measures of R&D Tax Incentives for OECD Countries," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
    16. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 43, March.
    17. Robert Atkinson, 2007. "Expanding the R&E tax credit to drive innovation, competitiveness and prosperity," The Journal of Technology Transfer, Springer, vol. 32(6), pages 617-628, December.
    18. Minford, Lucy & Meenagh, David, 2018. "Testing a model of UK growth - a causal role for R&D subsidies," Cardiff Economics Working Papers E2018/3, Cardiff University, Cardiff Business School, Economics Section.
    19. James C. Hearn & T. Austin Lacy & Jarrett B. Warshaw, 2014. "State Research and Development Tax Credits," Economic Development Quarterly, , vol. 28(2), pages 166-181, May.
    20. Agustin Redonda, 2016. "Tax Expenditures and Sustainability. An Overview," Discussion Notes 1603, Council on Economic Policies.

    More about this item

    Keywords

    Innovation policy; R&D tax credits; determinants of R&D investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2013n18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sheri Carnegie (email available below). General contact details of provider: https://edirc.repec.org/data/mimelau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.