Effectiveness of Fiscal Incentives for R&amp;D: Quasi-experimental Evidence

Irem Guceri; Li Liu

doi:10.1257/pol.20170403

journal article Feb 01, 2019

Effectiveness of Fiscal Incentives for R&D: Quasi-experimental Evidence

Irem Guceri Li Liu

American Economic Journal: Economic Policy Vol. 11 No. 1 pp. 266-291 · American Economic Association

View at Publisher Save 10.1257/pol.20170403

Abstract

We exploit a 2008 UK policy reform that increased the tax incentives for R&D in medium-sized enterprises relative to large ones, to overcome the endogeneity of exposure to such tax credits. We estimate a difference-in-difference design on the universe of corporation tax filings in the United Kingdom, combined with other datasets. We find a positive and significant impact of tax credits for R&D, implying a user-cost elasticity estimate of around −1.6. This magnitude implies around $1 in additional private R&D spending per dollar foregone in tax revenue. (JEL H25, H32, K34, L25, O32)

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Metrics

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Citations

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References

Details

Published: Feb 01, 2019
Vol/Issue: 11(1)
Pages: 266-291

Authors

I

Irem Guceri

Said Business School, Oxford University Centre for Business Taxation, Park End Street, OX1 1HP, Oxford, UK (email: )

L

Li Liu

International Monetary Fund, 1900 Pennsylvania Ave NW, Washington, DC 20009 (email: )

Cite This Article

Irem Guceri, Li Liu (2019). Effectiveness of Fiscal Incentives for R&D: Quasi-experimental Evidence. American Economic Journal: Economic Policy, 11(1), 266-291. https://doi.org/10.1257/pol.20170403

Effectiveness of Fiscal Incentives for R&amp;D: Quasi-experimental Evidence

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