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How has tax affected the changing cost of R&D? Evidence from eight countries

Author

Listed:
  • Nicolas Bloom

    (Institute for Fiscal Studies)

  • Lucy Chennells

    (Institute for Fiscal Studies)

  • Rachel Griffith

    (Institute for Fiscal Studies and University of Manchester)

  • John Van Reenen

    (Institute for Fiscal Studies)

Abstract

This paper describes the evolution of the tax treatment of investment in R&D in Australia, Canada, France, Great Britain, Germany, Italy, Japan and the USA between 1979 and 1994. Estimates of the cost of R&D capital are provided and the methodology used is contrasted with other ones used in the literature. Four …ndings are highlighted. First, there appear to be substantial differences in the cost of R&D capital across countries at any given point in time. Secondly, there has been a general trend towards more generous tax treatment of R&D, although some countries have moved much more rapidly than others. Thirdly, there is an increasing diversity in the cost of R&D capital between countries, a pattern that is in stark contrast to the convergence in the tax treatment of physical capital. Finally, simulations of the impact of four tax systems on a sample of R&D performing firms illustrates the within-country heterogeneity in the impact of R&D tax credits.

Suggested Citation

  • Nicolas Bloom & Lucy Chennells & Rachel Griffith & John Van Reenen, 1996. "How has tax affected the changing cost of R&D? Evidence from eight countries," IFS Working Papers W97/03, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:97/03
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    File URL: https://people.stanford.edu/nbloom/sites/default/files/bcgvr_wp.pdf
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    Citations

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    Cited by:

    1. Van Reenen, John & Griffith, Rachel & Bloom, Nicholas, 2000. "Do R&D Credits Work? Evidence From A Panel Of Countries 1979-97," CEPR Discussion Papers 2415, C.E.P.R. Discussion Papers.
    2. Jonathan Eaton & Eva Gutierrez & Samuel Kortum, 1998. "European technology policy," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 404-438.
    3. Karzanova Irina, 2005. "Impact of tax regime on real sector investment in Russia: marginal effective tax rates for physical, human and R&D capital," EERC Working Paper Series 05-16e, EERC Research Network, Russia and CIS.
    4. 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.

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