DP2415 Do R&D Credits Work? Evidence From A Panel Of Countries 1979-97
|Author(s):||Nicholas Bloom, Rachel Griffith, John Van Reenen|
|Publication Date:||April 2000|
|Keyword(s):||Panel Data, R&D, Tax Competition|
|JEL(s):||C25, L13, O31|
|Programme Areas:||Public Economics, Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2415|
This paper examines the impact of fiscal incentives on the level of R&D investment. An econometric model of R&D investment is estimated using a new panel of data on tax changes and R&D spending in nine OECD countries over a nineteen-year period (1979-1996). We find evidence that tax incentives are effective in increasing R&D intensity. This is true even after allowing for permanent country specific characteristics, world macro shocks and other policy influences. We estimate that a 10% fall in the cost of R&D stimulates a 1% rise in the level of R&D in the short-run; R&D increases by just under 10% in the long-run. Additionally there is some evidence that changes in R&D tax credits affect decisions over the international location of R&D as suggested by models of tax competition.