Effectiveness of fiscal incentives for R&D: quasi-experimental evidence

Guceri, Irem and Liu, Li (2015) Effectiveness of fiscal incentives for R&D: quasi-experimental evidence. CBT, Oxford.

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Abstract

With growing academic and policy interest in R&D tax incentives, the question about their effectiveness has become ever more relevant. In the absence of an exogenous policy reform, the simultaneous determination of companies' tax positions and their R&D spending causes an identification problem in evaluating tax incentives. To overcome this problem, we exploit a UK policy reform and use the population of corporation tax records that provide precise information on the amount of firm-level R&D expenditure. Using difference-in-differences and other panel regression approaches, we find a positive and significant impact of tax incentives on R&D spending, and an implied user cost elasticity estimate of around -2.3. This translates to more than a pound in additional private R&D for each pound foregone in corporation tax revenue

Item Type: Other Working Paper
Keywords: Tax incentives; corporation tax returns; quasi-experiment
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 08 Feb 2017 14:12
Last Modified: 08 Feb 2017 14:12
Funders: ESRC - ESL000016/1, Oxford University Said Foundation Research
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6284

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