Abstract
Tax incentives are widely used to incentivize firms to engage in research and development or to increase their R&D efforts. They can be volume-based or incremental. More and more countries have also adopted the patent box, which is an ex-post tax reward for successful innovators. Two broad methods are used in evaluating the effectiveness of tax incentives: the price elasticity of a user cost of R&D and counterfactual methods. In evaluating tax incentives a major question is whether there is crowding in or crowding out. More thorough evaluations do a cost-benefit analysis incorporating R&D spillover, the cost of financing tax expenditure, as well as administrative and compliance costs in the computation of the bang for the buck. Some studies look beyond the effect on R&D at the effect on innovation and productivity. R&D tax incentives are in principle neutral, but they are sometimes used to stimulate a particular type of R&D. They can also give rise to tax competition to attract R&D performers.
Original language | English |
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Title of host publication | Elgar Encyclopedia on the Economics of Knowledge and Innovation |
Editors | Christiano Antonelli |
Place of Publication | Cheltenham |
Publisher | Edward Elgar Publishing |
Chapter | 51 |
Pages | 415-419 |
Number of pages | 5 |
ISBN (Electronic) | 9781839106996 |
ISBN (Print) | 9781839106989 |
DOIs | |
Publication status | Published - 14 Oct 2022 |