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 nineteen 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 per cent fall in the cost of R&D stimulates just over a 1 per cent rise in the level of R&D in the short-run; and just under a 10 per cent rise in R&D in the long-run.
Authors
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Nicolas Bloom
John Van Reenen
Working Paper details
- DOI
- 10.1920/wp.ifs.1999.9908
- Publisher
- IFS
Suggested citation
N, Bloom and R, Griffith and J, Van Reenen. (1999). Do R&D tax credits work? Evidence from an international panel of countries 1979-1994. London: IFS. Available at: https://ifs.org.uk/publications/do-rd-tax-credits-work-evidence-international-panel-countries-1979-1994 (accessed: 18 April 2024).
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