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Will the real R&D employees please stand up? Effects of tax breaks on firm level outcomes

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  • Irem Guceri

    (Oxford University Centre for Business Taxation)

Abstract

This paper evaluates the effect of R&D tax incentives in a quasi-experimental setting. I identify the impact by exploiting a reform in UK policy which increased the SME threshold from 250 to 500 employees. First, I provide evidence that tax incentives help to increase R&D spending at the company level, and the effect translates to a user cost elasticity of -1.18. Second, R&D generated through the reform may be attributable to an increase in the number of R&D employees. I use R&D survey data for which the companies do not have an incentive to relabel their ordinary spending as R&D.

Suggested Citation

  • Irem Guceri, 2016. "Will the real R&D employees please stand up? Effects of tax breaks on firm level outcomes," Working Papers 1602, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:1602
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    References listed on IDEAS

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    5. Goolsbee, Austan, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," American Economic Review, American Economic Association, vol. 88(2), pages 298-302, May.
    6. Irem Guceri, 2015. "Tax incentives and R&D: an evaluation of the 2002 UK reform using micro data," Working Papers 1511, Oxford University Centre for Business Taxation.
    7. Van Reenen, John, 1997. "Why has Britain had slower R&D growth?," Research Policy, Elsevier, vol. 26(4-5), pages 493-507, December.
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    12. Eric Zwick & James Mahon, 2014. "Do financial frictions amplify fiscal policy? Evidence from business investment stimulus," Working Papers 1415, Oxford University Centre for Business Taxation.
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    14. Steve R. Bond & Irem Guceri, 2012. "Trends in UK BERD after the Introduction of R&D Tax Credits," Working Papers 1201, Oxford University Centre for Business Taxation.
    15. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 261-294.
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    Cited by:

    1. Diego d’Andria & Dimitrios Pontikakis & Agnieszka Skonieczna, 2018. "Towards a European R&D incentive? An assessment of R&D provisions under a common corporate tax base," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 27(5-6), pages 531-550, August.
    2. Agustin Redonda, 2016. "Tax Expenditures and Sustainability. An Overview," Discussion Notes 1603, Council on Economic Policies.
    3. Blandinieres, Florence & Steinbrenner, Daniela, 2021. "How does the evolution of R&D tax incentives schemes impact their effectiveness? Evidence from a meta-analysis," ZEW Discussion Papers 21-020, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    R&D; tax credits; difference-in-differences;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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