American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Tax Credits and Small Firm R&D Spending
American Economic Journal: Economic Policy
vol. 12,
no. 2, May 2020
(pp. 1–21)
Abstract
In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference-in-difference estimates show a 17 percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.Citation
Agrawal, Ajay, Carlos Rosell, and Timothy Simcoe. 2020. "Tax Credits and Small Firm R&D Spending." American Economic Journal: Economic Policy, 12 (2): 1–21. DOI: 10.1257/pol.20140467Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- L25 Firm Performance: Size, Diversification, and Scope
- O32 Management of Technological Innovation and R&D
- O38 Technological Change: Government Policy
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