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

Hall, Bronwyn H.; Van Reenen, John

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

NBER Working Paper No. w7098

54 Pages Posted: 17 Jun 1999 Last revised: 29 Nov 2022

See all articles by Bronwyn H. Hall

Bronwyn H. Hall

University of California at Berkeley; National Bureau of Economic Research (NBER); Institute for Fiscal Studies (IFS); Max Planck Institute for Innovation and Competition

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Date Written: April 1999

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.

Suggested Citation: Suggested Citation

Hall, Bronwyn H. and Van Reenen, John Michael, How Effective are Fiscal Incentives for R&D? a New Review of the Evidence (April 1999). NBER Working Paper No. w7098, Available at SSRN: https://ssrn.com/abstract=164935