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What does it take for and R&D tax incentive policy to be effective?

  • Pierre Mohnen

    ()

    (University of Maastrich, UNU-MERIT and CIRANO)

  • Boris Lokshin

    ()

    (University of Maastricht and UNU-MERIT)

We take a critical look at how to assess the effectiveness of R&D tax incentives. The net welfare gain is shown to be sensitive to a certain number of parameters. In particular, the deadweight loss associated with level-based tax incentives depends on the ex-ante R&D level. We report on the success of a past policy changes and simulate the effect of various parameter changes in the existing Dutch R&D tax incentive scheme. We show that this policy is more effective for small firms than for large firms. We end with a discussion of the pros and cons of volume-based versus incremental R&D tax incentives.

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File URL: http://ieb.ub.edu/aplicacio/fitxers/2009/10/Doc2009-9.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2009/9.

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Length: 34 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:ieb:wpaper:2009/10/doc2009-9
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  1. Ådne Cappelen & Arvid Raknerud & Marina Rybalka, 2008. "The effects of R&D tax credits on patenting and innovations," Discussion Papers 565, Statistics Norway, Research Department.
  2. Hollander, Abraham & Haurie, Alain & L'Ecuyer, Pierre, 1987. "Ratchet effects and the cost of incremental incentive schemes," Journal of Economic Dynamics and Control, Elsevier, vol. 11(3), pages 373-389, September.
  3. Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers 98-33, Centre de Recherche en Economie et Statistique.
  4. Jones, C-I & Williams, J-C, 1996. "Too Much of a Good Thing? The Economics of Investment in R&D," Papers 538, Harvard - Institute for International Development.
  5. Nicholas Bloom & Rachel Griffith & John Van Reenen, 2007. "Do R&D Tax Credits Work? Evidence from a Panel of Countries 1979-1997," Discussion Papers 07-020, Stanford Institute for Economic Policy Research.
  6. Jeffrey I. Bernstein, 1986. "The Effect of Direct and Indirect Tax Incentives on Canadian Industrial R&D Expenditures," Canadian Public Policy, University of Toronto Press, vol. 12(3), pages 438-448, September.
  7. Petr Hanel & Dirk Czarnitzki & Julio Miguel Rosa, 2005. "Evaluating the Impact of R&D Tax Credits on Innovation: A Microeconometric Study on Canadian Firms," Cahiers de recherche 05-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  8. Benjamin Russo, 2004. "A cost-benefit analysis of R&D tax incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 313-335, May.
  9. Dagenais, Marcel & Mohnen, Pierre & Therrien, Pierre, 2004. "Les firmes canadiennes répondent-elles aux incitations fiscales à la recherche-développement?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(2), pages 175-205, Juin-Sept.
  10. Mörk, Eva & Sjögren, Anna & Svaleryd, Helena, 2009. "Cheaper Child Care, More Children," IZA Discussion Papers 3942, Institute for the Study of Labor (IZA).
  11. Bronwyn H. Hall & John van Reenen, 1999. "How Effective are Fiscal Incentives for R&D? A New Review of the Evidence," NBER Working Papers 7098, National Bureau of Economic Research, Inc.
  12. Jacques Mairesse & Benoît Mulkay, 2004. "Une evaluation du credit d’impot recherche en France, 1980-1997," Working Papers 2004-43, Centre de Recherche en Economie et Statistique.
  13. Marcel Dagenais & Pierre Mohnen & Pierre Therrien, 1996. "Les firmes canadiennes répondent-elles aux incitations fiscales à la recherche-développement? (rapport final)," CIRANO Project Reports 1996rp-03, CIRANO.
  14. Boris Lokshin & Pierre Mohnen, 2007. "Measuring the Effectiveness of R&D tax credits in the Netherlands," CIRANO Working Papers 2007s-29, CIRANO.
  15. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
  16. repec:crs:wpaper:9833 is not listed on IDEAS
  17. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
  18. repec:crs:wpaper:9657 is not listed on IDEAS
  19. Bloom, Nicholas & Griffith, Rachel & Van Reenen, John, 2000. "Do R&D Credits Work? Evidence From A Panel Of Countries 1979-97," CEPR Discussion Papers 2415, C.E.P.R. Discussion Papers.
  20. Rufin Baghana & Pierre Mohnen, 2009. "Effectiveness of R&D tax incentives in small and large enterprises in Québec," Small Business Economics, Springer, vol. 33(1), pages 91-107, June.
  21. Daniel J. Wilson, 2005. "Beggar thy neighbor? the in-state vs. out-of-state impact of state R&D tax credits," Working Paper Series 2005-08, Federal Reserve Bank of San Francisco.
  22. Emmanuel Duguet, 2008. "L’effet du credit d’impôt recherche sur le financement privé de la recherche : une évaluation économétrique," Documents de recherche 08-08, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
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