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R&D tax credits and their macroeconomic impact in the EU: an assessment using QUEST III

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R&D tax credits are currently used by 25 Member States as a means to stimulate R&D investment and, ultimately, economic growth and employment. This paper is a first attempt to provide an in-depth analysis of the structural economic factors that, other things equal, affect or condition the potential macroeconomic impacts of expanding (or start implementing) R&D tax credit schemes. The analysis is based on the European Commission's QUEST III semi-endogenous growth model. Our main conclusion is that, while the short and medium-term impacts of increased R&D tax credits on Member States' GDP and other macroeconomic aggregates are overall significantly positive, there remains space to substantially improve the cost-effectiveness of these policies.

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  • Miguel Sanchez-Martinez & Cristiana Benedetti-Fasil & Peder Christensen & Nicolas Robledo-Bottcher, 2017. "R&D tax credits and their macroeconomic impact in the EU: an assessment using QUEST III," JRC Research Reports JRC108931, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc108931
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    Keywords

    R&D tax credits; innovation; economic growth; macroeconomic modelling;
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