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The Impact of Research and Development Tax Incentives on Colombia’s Manufacturing Sector: What Difference Do They Make?

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  • Ms. Valerie A Mercer-Blackman

Abstract

Do tax incentives for science and technology stimulate additional investment? We use detailed data on applications and acceptances for R&D tax incentives, a special survey, and for the first time, the science and technology module from the 2000-2002 Survey of Manufacturers database in Colombia to analyze this question. We estimate the effect of the R&D tax deduction instituted in Colombia using Zellner's Seemingly Unrelated Regressions method, and find that the elasticity of demand of R&D investment in manufacturing is quite high in Colombia compared to other countries, particularly for smaller firms, but that the direct benefit from existing policies is minimal. Overall, the results of the paper suggest that there is a great potential for such incentives to promote R&D investment in Colombia, but in their current form, they fail to target those firms that could benefit the most.

Suggested Citation

  • Ms. Valerie A Mercer-Blackman, 2008. "The Impact of Research and Development Tax Incentives on Colombia’s Manufacturing Sector: What Difference Do They Make?," IMF Working Papers 2008/178, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/178
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    References listed on IDEAS

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    1. Jeffrey I. Bernstein, 1988. "Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 324-347, May.
    2. Mani, Sunil, 2004. "Coping with Globalisation An Analysis of Innovation Capability in Brazilian Telecommunications Equipment Industry," UNU-INTECH Discussion Paper Series 2004-03, United Nations University - INTECH.
    3. repec:idb:brikps:9178 is not listed on IDEAS
    4. Hernan Jaramillo Salazar & Carlos Pombo & Juan Miguel Gallego, 2002. "Incentivos fiscales en ciencia, tecnología e innovación: una revisión y análisis de la experiencia internacional," Borradores de Investigación 2828, Universidad del Rosario.
    5. 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.
    6. 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.
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    Cited by:

    1. 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.
    2. Miglo, Anton, 2017. "Timing of earnings and capital structure," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 1-15.
    3. Busom, Isabel & Vélez-Ospina, Jorge Andrés, 2017. "Innovation, Public Support, and Productivity in Colombia. A Cross-industry Comparison," World Development, Elsevier, vol. 99(C), pages 75-94.

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