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Do R&D tax credits work? Evidence from a panel of countries 1979-1997

By Nick Bloom, Rachel Griffith and John Van Reenen

Abstract

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 19-year period (1979–1997). 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 just over a 1% rise in the level of R&D in the short-run, and just under a 10% rise in R&D in the long-run

Topics: HJ Public Finance
Publisher: Elsevier
Year: 2002
DOI identifier: 10.1016/S0047-2727(01)00086-X
OAI identifier: oai:eprints.lse.ac.uk:1353
Provided by: LSE Research Online
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