Tax Credits and Small Firm R&D Spending

Tax Credits and Small Firm R&D Spending

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.

Ajay Agrawal, Carlos Rosell, and Timothy Simcoe

American Economic Journal: Economic Policy

April 2020

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By |2020-05-12T09:27:35-07:00May 12th, 2020|Efficiency/Growth, Intellectual Property, Reference, Reforms|