{
  "title": "Effectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence",
  "publication": "IMF Working Papers, March 31, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/03/31/effectiveness-of-fiscal-incentives-for-r-d-quasi-experimental-evidence-44786",
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  "summary": "With growing academic and policy interest in research and development (R&D) tax incentives, the question about their effectiveness has become ever more relevant.",
  "sections": [
    {
      "heading": "Research question and identification",
      "content": "- Evaluates the effectiveness of R&D tax incentives given the identification problem from the simultaneous determination of companies’ tax positions and their R&D spending.\n- Overcomes the identification challenge by exploiting a U.K. policy reform and using the population of corporation tax records that provide firm-level R&D expenditure."
    },
    {
      "heading": "Data and empirical approach",
      "content": "- Data: population of corporation tax records with precise firm-level R&D expenditure.\n- Methods: difference-in-differences and other panel regression approaches applied to the quasi-experimental setting created by the U.K. policy reform."
    },
    {
      "heading": "Main findings",
      "content": "- Finds a positive and significant impact of tax incentives on R&D spending.\n- Implied user cost elasticity estimate of around -1.6.\n- Effect magnitude: translates to more than a pound in additional private R&D for each pound foregone in corporation tax revenue."
    },
    {
      "heading": "Interpretation and policy implications",
      "content": "- R&D tax incentives can substantially increase private R&D spending when evaluated using exogenous variation from policy reform.\n- The estimated user cost elasticity of around -1.6 implies policy trade-offs where fiscal cost per unit of additional private R&D may be less than one pound of foregone tax revenue per pound of additional private R&D.\n- Evidence supports the use of fiscal incentives as a tool to stimulate private sector R&D, conditional on design and targeting that create exogenous variation similar to the exploited reform.\n\nEffectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence — Irem Guceri, Li Liu, March 31, 2017.\n\n---\n\n Content in this bundle\n\n- Effectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence\n  - Effectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Effectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/03/31/effectiveness-of-fiscal-incentives-for-r-d-quasi-experimental-evidence-44786"
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    "Authors: Irem Guceri, Li Liu",
    "Published: March 31, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475591170.001",
    "Evaluates the effectiveness of R&D tax incentives given the identification problem from the simultaneous determination of companies’ tax positions and their R&D spending.",
    "Overcomes the identification challenge by exploiting a U.K. policy reform and using the population of corporation tax records that provide firm-level R&D expenditure.",
    "Data: population of corporation tax records with precise firm-level R&D expenditure.",
    "Methods: difference-in-differences and other panel regression approaches applied to the quasi-experimental setting created by the U.K. policy reform.",
    "Finds a positive and significant impact of tax incentives on R&D spending.",
    "Implied user cost elasticity estimate of around -1.6.",
    "Effect magnitude: translates to more than a pound in additional private R&D for each pound foregone in corporation tax revenue.",
    "R&D tax incentives can substantially increase private R&D spending when evaluated using exogenous variation from policy reform.",
    "The estimated user cost elasticity of around -1.6 implies policy trade-offs where fiscal cost per unit of additional private R&D may be less than one pound of foregone tax revenue per pound of additional private R&D.",
    "Evidence supports the use of fiscal incentives as a tool to stimulate private sector R&D, conditional on design and targeting that create exogenous variation similar to the exploited reform.",
    "**Effectiveness of Fiscal Incentives for R&D: Quasi-Experimental Evidence**"
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