Do tax Incentives for Research Increase Firm Innovation? An RD Design for R&D / Antoine Dechezleprêtre, Elias Einiö, Ralf Martin, Kieu-Trang Nguyen, John Van Reenen.

Format:

Book

Author/Creator:

Dechezleprêtre, Antoine.

Contributor:

National Bureau of Economic Research.

Einiö, Elias.

Martin, Ralf.

Nguyen, Kieu-Trang.

Van Reenen, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22405.

NBER working paper series no. w22405

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

We present evidence of a causal impact of research and development (R&D) tax incentives on innovation. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting (even when quality-adjusted). R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population of smaller firms and subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design. Over the 2006-11 period aggregate business R&D would be around 10% lower in the absence of the tax relief scheme. We also show that the R&D generated by the tax policy creates positive spillovers on the innovations of techno-logically related firms.

Notes:

Print version record

July 2016.