Profit Taxation, R&D Spending, and Innovation

Andreas Lichter; Max Löffler; Ingo E. Isphording; Thu-Van Nguyen; Felix Pöge; Sebastian Siegloch

Profit Taxation, R&D Spending, and Innovation

Andreas Lichter
, Max Löffler
, Ingo E. Isphording
, Thu-Van Nguyen
, Felix Pöge
, Sebastian Siegloch

Research output: Working paper / Preprint › Working paper

Abstract

We study how business taxes affect establishments’ R&D activities. Relying on geocoded panel data targeting the universe of R&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987–2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments’ total R&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R&D inputs, among establishment characteristics, and for different types of research projects.

Original language	English
Publisher	ECONtribute
Number of pages	48
Publication status	Published - Sept 2022

Publication series

Series	ECONtribute Discussion Paper
Number	202

JEL classifications

h25 - Business Taxes and Subsidies including sales and value-added (VAT)
h32 - Fiscal Policies and Behavior of Economic Agents: Firm
o31 - Innovation and Invention: Processes and Incentives
o32 - Management of Technological Innovation and R&D

Keywords

corporate taxation
firms
R&D
innovation
patents

Access to Document

https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_202_2022.pdf

Data and Code for: Profit Taxation, R&D Spending, and Innovation
Lichter, A. (Creator), Löffler, M. (Creator), Isphording, I. E. (Creator), Pöge, F. (Creator), Nguyen, T.-V. (Creator) & Siegloch, S. (Creator), openICPSR, 8 Jan 2025
DOI: 10.3886/E198350V1, https://www.openicpsr.org/openicpsr/project/198350/
Dataset/Software: Dataset

2 Article

Profit Taxation, R&D Spending, and Innovation
Lichter, A., Löffler, M., Isphording, I. E., Nguyen, T.-V., Poege, F. & Siegloch, S., 3 Feb 2025, In: American Economic Journal-Economic Policy. 17, 1, p. 432-463 32 p.
Research output: Contribution to journal › Article › Academic › peer-review

Open Access
File
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Der Einfluss lokaler Steuerpolitik auf betriebliche F&E-Aktivitäten
Translated title of the contribution: The Influence of Local Tax Policy on Corporate R&D ActivitiesLichter, A., Löffler, M. & Siegloch, S., 1 Nov 2024, In: Wirtschaftsdienst. 104, 11, p. 758–762 5 p.
Research output: Contribution to journal › Article › Professional

Open Access

Cite this

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title = "Profit Taxation, R\&D Spending, and Innovation",

abstract = "We study how business taxes affect establishments{\textquoteright} R\&D activities. Relying on geocoded panel data targeting the universe of R\&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987{\textendash}2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments{\textquoteright} total R\&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R\&D inputs, among establishment characteristics, and for different types of research projects.",

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AU - Löffler, Max

AU - Isphording, Ingo E.

AU - Nguyen, Thu-Van

AU - Pöge, Felix

AU - Siegloch, Sebastian

N1 - data source: Stifterverband

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N2 - We study how business taxes affect establishments’ R&D activities. Relying on geocoded panel data targeting the universe of R&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987–2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments’ total R&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R&D inputs, among establishment characteristics, and for different types of research projects.

AB - We study how business taxes affect establishments’ R&D activities. Relying on geocoded panel data targeting the universe of R&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987–2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments’ total R&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R&D inputs, among establishment characteristics, and for different types of research projects.

KW - corporate taxation

KW - firms

KW - R&D

KW - innovation

KW - patents

M3 - Working paper

T3 - ECONtribute Discussion Paper

BT - Profit Taxation, R&D Spending, and Innovation

PB - ECONtribute

ER -

Profit Taxation, R&D Spending, and Innovation

Abstract

Publication series

JEL classifications

Keywords

Access to Document

Fingerprint

Datasets

Data and Code for: Profit Taxation, R&D Spending, and Innovation

Research output

Profit Taxation, R&D Spending, and Innovation

Der Einfluss lokaler Steuerpolitik auf betriebliche F&E-Aktivitäten

Cite this