corporate taxation and capital accumulation evidence from sectoral panel data for 14 oecd countries abstract we present new empirical evidence that sector level capital output ratios are strongly influenced by corporate tax incentives as summarised by the tax component of a standard user cost of capital measure we use sectoral panel data for the usa japan australia and eleven eu countries over the period 1982 2007 our panel combines internationally consistent data on capital stocks value added and relative prices from the eu klems database with corporate tax measures from the oxford university centre for business taxation our results for equipment investment are particularly robust and strikingly consistent with the basic economic theory of corporate investment

internal and external effects of r d subsidies and fiscal incentives empirical evidence using spatial dynamic panel models abstract most studies evaluating the macroeconomic effects of financial support policies on business funded r d use econometric methods that do not consider the existence of spatial effects and generate biased estimates in this paper we discus and address this problem using spatial dynamic panel data methods this allow us to provide new insights on the internal in country and external out of country effects of both research and development r d subsidies and fiscal incentives we use a database of 25 oecd countries for the period 1990 2009 in relation to internal effects for both instruments we find a non linear relationship between their effect on private r d and their level suggesting the possibility of leveraging and crowding out effects we also find a substitution effect between the r d subsidies and fiscal incentives implemented within a country concerning the spatial component we find evidence of positive spatial spillovers among private r d investments however our results suggest the existence of competition substitution effects between national r d policies

do r d tax credits work evidence from a panel of countries 1979 1997 this paper examines the impact of fiscal incentives on the level of r d investment an econometric model of r d investment is estimated using a new panel of data on tax changes and r d spending in nine oecd countries over a 19 year period 1979 1997 we find evidence that tax incentives are effective in increasing r d intensity this is true even after allowing for permanent country specific characteristics world macro shocks and other policy influences we estimate that a 10 fall in the cost of r d stimulates just over a 1 rise in the level of r d in the short run and just under a 10 rise in r d in the long run

the direction of innovation abstract how do innovation policies affect the direction of research is market based innovation too radical or too incremental we construct a novel and tractable model of the direction of innovation firms pursue inefficient research directions because they race to discover easy yet less valuable projects and because they work on difficult inventions where they can appropriate a larger portion of the social value fixing these inefficiencies requires policy to condition on properties of inventions that could have been discovered but were not policies which do not do so like patents and prizes may fail to encourage firms to research in the efficient direction even if they obtain the optimal quantity of r d

how effective are fiscal incentives for r d a review of the evidence 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

patterns of internationalisation of corporate technology location vs home country advantages given the trends towards increasing globalisation of markets and of production the globalisation of technology remains a subject of considerable interest to analysts and policy makers in the 1990s this paper provides some new empirical observations for debate and discussion on the patterns of technological activities of large firms outside their home countries it is based on a systematic analysis of the us patenting activities of 220 of the most internationalised firms in terms of their technology in the 1990s although firms are active outside their home countries in the high technology fields such as computers pharmaceuticals telecommunications image and sound and materials quite a sizeable proportion of their foreign activities are concerned with process and machinery technologies moreover a comparison of the technological advantage of the company at home and the advantage of the location shows that in a large majority of cases firms tend to locate their technology abroad in their core areas where they are strong at home these results suggest that adapting products and processes and materials to suit foreign markets and providing technical support to off shore manufacturing plants remain major factors underlying the internationalisation of technology they are also consistent with the notion that firms are increasingly engaging in small scale activities to monitor and scan new technological developments in centres of excellence in foreign countries within their areas of existing strength however there is little evidence to suggest that even these most internationalised firms routinely go abroad to compensate for their weakness at home

how responsive is business capital formation to its user cost an exploration with micro data abstract the response of business capital formation to its user cost is critical to evaluating tax reform deficit reduction and monetary policy evidence for a substantial user cost elasticity however is sparse most evidence has been based on aggregate data although several recent studies with firm level data report substantial effects with a particularly rich micro dataset containing over 26 000 observations this paper explores what can be learned about the user cost elasticity while the results depend to some extent on the specification and econometric technique various diagnostics lead us to prefer a precisely estimated but small elasticity of approximately 0 25 this paper is dedicated to the memory of robert eisner who labored early and ably on uncovering the determinants of investment spending and highlighting the importance of the question found in the title of this paper

r d support programs in developing countries the turkish experience in this study the determinants of private r d investment are examined at the level of firms in the turkish manufacturing industry we focus our attention on the effect of public r d support programs our findings indicate that public r d support significantly and positively affects private r d investment there seems to be even an acceleration effect on firm financed r d expenditures smaller r d performers benefit more from r d support and perform more r d in addition technology transfer from abroad and domestic r d activity show up as complementary processes given the scarcity of studies on r d support in technologically weaker economies our hope is that the less developed countries can exploit these findings in constructing socially beneficial technology policies

entrepreneurial innovations and taxation stimulating entrepreneurship is high on the policy agenda of many countries we study the effects of tax policies on entrepreneurs choice of riskiness or quality of an innovation project and on their mode of commercializing the innovation market entry versus sale limited loss offset provisions in the tax system induce entrepreneurs innovating for entry to choose projects with inefficiently little risk the same distortion does not arise when entrepreneurs sell their innovation in a competitive bidding process to an incumbent before the uncertainty is revealed tax systems which systematically favor market entry of entrepreneurs can thus lead to welfare losses due to inefficient quality choices despite leading to more competition in the product market

market failures and the additionality effects of public support to private r d theory and empirical implications we extend the theoretical basis of the empirical literature on the effects of r d subsidies by providing an estimable model of strategic interaction among subsidy applicants and public and private sector r d financiers our model incorporates fixed r d cost and a cost of external finance we derive the optimal support rule at the intensive extensive margin the costs of external funding reduce increase the optimal subsidy rate we also establish necessary and sufficient conditions for the existence of additionality it turns out that additionality at the intensive margin is less likely with higher spillovers our results suggest that the relationship between additionality and welfare may not be straightforward

a theory of growth and volatility at the aggregate and firm level abstract we present an endogenous growth model that explains the evolution of the first and second moments of productivity growth at the aggregate and firm level during the post war period growth is driven by the development of both i idiosyncratic r d innovations and ii general innovations that can be freely adopted by many firms firm level volatility is affected primarily by the schumpeterian dynamics associated with the development of r d innovations the variance of aggregate productivity growth is driven by the arrival rate of general innovations ceteris paribus the share of resources spent on development of general innovations increases with the stability of the market share of the industry leader as market shares become less persistent the model predicts an endogenous shift in the allocation of resources from the development of general innovations to the development of r d innovations this results in an increase in r d an increase in firm level volatility and a decline in aggregate volatility the effect on productivity growth is ambiguous on the empirical side this paper presents new cross country evidence that r d subsidies are not significantly associated with higher growth but are associated with lower aggregate volatility it also documents an upward trend in the instability of market shares a positive association between firm volatility and r d spending and a negative association across sectors between r d and how correlated the sector is with the rest of the economy

multinationals and industrial policy are there benefits to the host country from multinational investments does potential value from these investments make active industrial policy worthwhile we answer the first question affirmatively having reviewed economic principles and evidence concerning the effects of projects locating in or not being off shored from a country on the second policy can have a limited effect in influencing location decisions but it is doubtful that it is cost effective implementation faces lack of information risk of capture and in many cases non rigorous processes competition between jurisdictions means that much policy is investment diversion not investment creation there is a case for supra national controls as with eu state aid regulations for policy to be used only for well defined market failures and for better implementation and more rigorous ex ante appraisal and ex post evaluation copyright 2013 oxford university press

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

global warming and endogenous technological change revisiting the green paradox one of the most pressing policy challenges facing the world today concerns how to mitigate global warming while improving people s well being the green paradox argues that increasing taxes on co2 emissions exacerbates global warming in the present because firms have the incentive to bring forward the extraction and sale of fossil fuels this paper shows that whenever technological progress allows the extraction costs of fossil fuels to be reduced over time and a positive r d subsidy is paid a growing tax on co2 emissions reveals a welfare maximizing policy

national scientific capacity and r d offshoring abstract this paper presents new evidence regarding the role of national scientific capacity in driving patterns of r d offshoring using a larger and more comprehensive dataset than has hitherto been used and applying it in a gravity model framework our results unambiguously support the importance of inventor country scientific capacity in attracting offshored r d as expected the home country s scientific capacity is also found to play a positive role we find that in fact on average firms source technology from less technologically advanced nations suggesting that firms offshore to access niche skills

choosing organizational modes of strategic technology partnering international and sectoral differences this paper focuses on international strategic technology partnerships and the choice that companies have in terms of the organizational mode either through complex inter organizational modes involving equity sharing or contractual non equity alliances the empirical results show that the choice of particular mode of cooperation varies with the technological characteristics of sectors of industry joint ventures are disproportionately represented in relatively mature industries contractual alliances dominate strategic technology partnering in so called high tech industries

productivity under the 1997 2010 labour government what was the productivity record under the labour government of 1997 2010 i show that productivity growth and economic performance in general was good when the uk is compared with its main international peers only the us had stronger productivity growth and the uk did better than the us in terms of the jobs market much of this improved performance was a continuation of the pattern since 1979 which broke a century of relative decline some part of the improvement is directly linked to policies especially over human capital innovation and competition we discuss the recent productivity puzzle the disappointing productivity figures since the onset of the great recession in 2008 and argue that our conclusions are unchanged as most other oecd countries have also experienced poor measured productivity

uncertainty and the dynamics of r d uncertainty varies strongly over time rising by 50 to 100 in recessions and by up to 200 after major economic and political shocks this paper shows that higher uncertainty reduces the responsiveness of r d to changes in business conditions a caution effect making it more persistent over time thus uncertainty will play a critical role in shaping the dynamics of r d through the business cycle and its response to technology policy i also show that if firms are increasing their level of r d then the effect of uncertainty will be negative while if firms are reducing r d then the effect of uncertainty will be positive

participation inertia in r d tax incentive and subsidy programs we examine how persistent firms participation is in rd the use of tax credits in contrast is unrelated to a firm s productivity our results suggest that r d tax incentives and r d subsidies are not substitutes and that any unintended misallocation of support is likely to persist

what drives business research and development r d intensity across organisation for economic co operation and development oecd countries this paper empirically investigates the potential determinants of business sector r d intensity using a panel of oecd countries for the period of 1975 2002 with data measured as five year averages estimates using a system gmm estimator controlling for endogeneity show a high degree of persistence in business sector r d expenditures tax incentives for r d have a significant and positive impact on business r d spending regardless of the specification and estimation techniques furthermore we find that expenditures for r d performed by universities are significantly positively related to business enterprise sector expenditures on r d indicating that public sector r d and private r d are complements direct r d subsidies and the high tech export share are significantly positively related to business sector r d intensity but these effects are only significant using the first differenced gmm estimator the static fixed effects results show that countries characterised by strong patent rights appear to hav

you can lead a firm to r d but can you make it innovate uk evidence from smes the uk government introduced tax credits for smes to promote and support r d in 2000 since then the policy has become more generous in this respect particularly since 2008 in this paper we use the national systems of entrepreneurship as a conceptual framework in which to question whether smes take up of tax credits has actually led to an increase in product service or process innovations our evidence suggests that a sme engagement with the policy is fairly randomly distributed across the sector and b there is little additional product service innovation to justify the expenditure in foregone taxes given the current distribution of credits but c there is evidence of enhanced radical process innovations particularly when combined with strong capability and planning at the firm level

the effectiveness of tax incentives for r d i in developing countries the case of argentina abstract there is increasing interest in developing countries in granting tax incentives in order to encourage private investment in research development and innovation r d i however evidence on the effectiveness of such schemes in achieving policy goals in weak innovation systems contexts is still very scarce this paper aims at narrowing this knowledge gap by focusing on the effects of a tax credit scheme for promoting firm level innovation investment in argentina the analysis applies dynamic panel data techniques to a novel dataset merging several waves of the national innovation survey collected by the national institute of statistics and censuses the results suggest that the elasticity of r d i investment to its user cost of capital is a greater than 1 in absolute terms which implies that the intervention has been effective in increasing firms innovation efforts however effects vary depending on the type of innovation investment being subsidized industrial sector and size of the firm moreover when innovation investment is divided into innovation related capital goods expenditures and only r d the results suggest that the absolute value of the elasticity for the r d component of the innovation investment is less than 1 these heterogeneous effects should be exploited for further policy design

do tax credits stimulate r d spending the effect of the r d tax credit in its first decade abstract this paper examines the impact of the u s federal r d tax credit between 1981 1991 using confidential irs data from corporate tax returns the empirical analysis makes two key advances on previous work first it implements a new instrumental variables iv strategy based on tax changes that directly addresses the simultaneity of r d spending and marginal credit rates second the analysis makes use of new restricted access irs corporate return data describing r d expenditures estimates imply that a10 reduction in the user cost of r d leads the average firm to increase its research intensity the ratio of r d spending to sales by 19 8 in the short run long run estimates imply that the average firm faces adjustment costs and increases spending over time though small and young firms show evidence of reversing initial increases analysis of the components of qualified research shows that wages and supplies account for the bulk of the increase in research spending elasticities of qualified and total research intensities from a smaller sample suggest firms respond to user cost changes largely by increasing their qualified spending meaning that the type of r d the federal credit deems qualified research is an important margin on which the credit affects firm behavior

appropriate intellectual property protection and economic growth in countries at different levels of development this paper examines how the role of patents and utility models in innovation and economic growth varies by level of economic development using a panel dataset of over 70 countries we find that patent protection is an important determinant of innovation and that patentable innovations contribute to economic growth in developed countries but not in developing instead in developing economies a minor form of intellectual property rights iprs namely utility models is conducive to innovation and growth controlling for other factors using korean firm level data as a case study we find that utility model innovations contribute to firm performance when firms are technologically lagging and that those minor innovations can be a learning device and thus a stepping stone for developing more patentable inventions later on upon reaching higher levels of technological capabilities firms become more reliant upon patents and less on utility models thus the lesson here is that patent protection enhances innovation and economic growth in countries where the capacity to conduct innovative research exists where this capacity is weaker a system that provides incentives to conduct minor incremental inventions is more conducive to growth the significance of this paper is to emphasize the importance not just of the strength of iprs but of the appropriate type of iprs for economic development

the effectiveness of r d tax credits in order to measure the effect of tax credits on private r d investment researchers confront the difficult problem of finding an exogenous measure of tax policy that exhibits sufficient variation

do r d tax credits work evidence from an international panel of countries 1979 1994 this paper examines the impact of fiscal incentives on the level of rd and just under a 10 per cent rise in r d in the long run

who participates in r d subsidy programs the case of spanish manufacturing firms abstract empirical evidence on the effectiveness of r d subsidies to firms has produced mixed results so far one possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries leading to different outcomes in terms of the induced additional private effort here we focus on the participation stage using a sample of spanish firms we test for differences across agencies and industries our results suggest that firms in the same industry face different hurdles to participate in different agencies programs that participation patterns may reflect a combination of agency goals and that patterns differ across high tech and low tech industries

public r d policies and cost behavior of the us manufacturing industries abstract this paper estimates and evaluates the contribution of r d tax incentives and publicly financed r d investment policies in promoting the growth of output and privately funded r d investment in us manufacturing industries publicly financed r d induced cost savings but crowds out privately financed r d investment while the incremental r d tax credit and immediate deductibility provision of r d expenditures have a significant impact on privately financed r d investment the optimal mix of both instruments is an important element for sustaining a balanced growth in output and productivity in the manufacturing sector

european tax harmonisation and production efficiency this paper analyses the impact on production efficiency of potential harmonisation of the taxation of income from capital in the european union it develops and applies a methodology for computing the cost of capital for transnational investments to assess the degree to which production efficiency holds in the eu it considers the impact of potential forms of corporation tax harmonisation the results indicate that some commonly advocated reforms e g harmonising tax rates or tax bases would not significantly move the tax system towards production efficiency but that other reforms which affect the taxation of cross border flows would have more impact

estimation of time varying average treatment effects using panel data when unobserved fixed effects affect potential outcomes differently this paper proposes a new approach to estimate the time varying average treatment effect using panel data to control for unobserved fixed effects the approach allows identifying the average treatment effect on the entire population even if the fixed effects affect potential outcomes under treatment and no treatment differently which can cause heterogeneity in treatment effects among unobserved characteristics note that a popularly used standard difference in differences approach can only identify the average treatment effect on the treated moreover the proposed approach allows time varying treatment effects the approach exploits panel data with a specific structure in which the treatment exposure expands to the entire population over time i apply the proposed approach to estimate the effect of the introduction of electronic voting technology for the reduction of residual votes in brazilian elections

corporate taxation and the choice of patent location within multinational firms corporate patents are perceived to be the key profit drivers in many multinational enterprises mnes moreover as the transfer pricing process for royalty payments is often highly intransparent they also constitute a major source of profit shifting opportunities between multinational entities for both reasons mnes have an incentive to locate their patents at affiliates with a relatively small corporate tax rate our paper empirically tests for this relationship by exploiting a unique dataset which links information on patent applications to micro panel data for european mnes our results suggest that the corporate tax rate differential to other group members indeed exerts a negative effect on the number of patents filled by a subsidiary the effect is quantitatively large and robust against controlling for affiliate size the findings prevail if we additionally account for royalty withholding taxes moreover binding controlled foreign company rules tend to decrease the number of patent applications

why is capital so immobile internationally possible explanations and implications for capital income taxation the evidence on international capital immobility is extensive including the lack of international portfolio diversification real interest differentials across countries and the high correlation between domestic savings and investment the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy without asymmetric information past work showed that small open economies should not impose corporate income taxes with asymmetric information the optimal policy instead involves government subsidies to capital imports some omitted factors that argue against subsidizing capital imports are explored briefly copyright 1996 by american economic association

r d tax incentives in eu countries does the impact vary with firm size this paper studies the effect of r d tax incentives on the research activity of manufacturing firms based in france italy spain and the uk over the period 2007 2009 using a matching procedure we show that in all the examined countries but spain r d tax incentives induced a statistically significant increase in the intensity of r d expenses over sales however this effect is driven only by the behaviour of small firms by assessing the benefit cost ratio of r d tax policies we find evidence of substantial additional effects in italy and the uk

tax incentives and r d activity firm level evidence from taiwan this paper investigates the effect of tax incentives on r d activities in taiwanese manufacturing firms specifically we assess the potential r d enhancing effect on recipients of r d tax credits compared with their non recipient counterparts moreover the potential difference in the r d enhancing effect between high tech and non high tech firms is also examined utilizing a firm level panel dataset during 2001 and 2005 empirical results obtained by propensity score matching show that recipients of r d tax credits appear on average to have 93 53 higher r d expenditures and a 14 47 higher growth rate for r d expenditures than non recipients with similar characteristics the r d enhancing effect of r d tax credits is not found to be particularly relevant to high tech or non high tech firms we further employ a generalized method of moment gmm of the panel fixed model to control for the endogeneity of r d tax credits and firm heterogeneity in determining r d expenditure various estimates based on the entire sample and high tech firms are quite similar and there is a significantly r d enhancing effect of r d tax credits this result suggests that the r d preferential policy has induced more r d expenditure by firms in taiwan while the existence of the r d enhancing effect brought on by tax incentives is intuitive the estimates can provide insightful implications for the r d tax policy