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Research Details

Do Tax Incentives for Research Increase Firm Innovation? An RD Design for R&D

Abstract

We present evidence of causal impacts of research and development (R&D) tax incentives on own-firm innovation and technological spillovers. Exploiting a change in the asset-based size thresholds that determine eligibility for R&D tax subsidies we implement a Regression Discontinuity Design using administrative tax data. There are statistically and economically significant effects of tax on R&D and (quality-adjusted) patenting that persist up to 7 years after the change. R&D tax price elasticities are large, with a lower bound of 1.1, consistent with the fact that the treated group is drawn from smaller firms that we show are more likely subject to financial constraints. Our RD design has power to identify positive spillovers on technologically-close peers, when these neighbors are in a sufficiently small technology class with the treated firms.

Type

Working Paper

Author(s)

Antoine Dechezlepretre, Elias Einio, Ralf Martin, Kieu-Trang Nguyen, John Van Reenen

Date Published

2020

Citations

Dechezlepretre, Antoine, Elias Einio, Ralf Martin, Kieu-Trang Nguyen, and John Van Reenen. 2020. Do Tax Incentives for Research Increase Firm Innovation? An RD Design for R&D.

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