How Effective are Fiscal Incentives for R&D? A New Review of the Evidence

Abstract

This paper surveys the econometric evidence on the effectiveness of fiscal incentives for R&D.We describe the effects of tax systems in OECD countries on the user cost of R&D -the current position, changes over time and across different firms in different countries.We describe and criticize the methodologies used to evaluate the effect of the tax system on R&D behavior and the results from different studies.In the current (imperfect) state of knowledge we conclude that a dollar in tax credit for R&D stimulates a dollar of additional R&D.

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