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Discussion Paper Details

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Title: Taxation and Innovation: What Do We Know?

Author(s): Ufuk Akcigit and Stefanie Stantcheva

Publication Date: May 2020

Keyword(s): entrepreneurship, growth, Innovation, inventors, patents, productivity, R&D and taxation

Programme Area(s): Industrial Organization, Macroeconomics and Growth and Public Economics

Abstract: Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.

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Bibliographic Reference

Akcigit, U and Stantcheva, S. 2020. 'Taxation and Innovation: What Do We Know?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14782