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

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

public support for technical advance the role of firm size this article develops a model that shows how firm size that most important firm level correlate of r d moderates the impact of demand and supply side government policies that support r d the most robust result is that government support to product r d will elicit less of a response the greater is average firm size within the industry this result suggests for example that government support to upstream research in the life sciences will stimulate less downstream industrial investment in the development of new drugs to the extent that the firms in the downstream industry are larger the model also predicts that where entry is less encumbered we can expect demand side subsidies to elicit greater product r d within an industry thus to the degree that for example barriers to entering the solar panel manufacturing industry are lower we should expect r d on solar panel development to rise more in response to tax credits for their purchase

sectors and the additionality effects of r d tax credits a cross country microeconometric analysis abstract do the additionality effects of r d tax credits vary across sectors the paper presents a micro econometric analysis of this question for three countries norway italy and france we use a panel of firm level data from three waves of the innovation surveys carried out in these countries for 2004 2006 and 2008 the study estimates input and output additionality effects of r d tax credits in each of these economies and it investigates how these effects differ across sectors characterized by different r d orientation and competition conditions the results point out that firms in industries with high r d orientation have on average higher propensity to apply to r d fiscal incentives schemes and stronger input and output additionality effects output additionality is found to differ among the three examined countries

implementing r d policies an analysis of spain s pharmaceutical research program we analyze spain s national pharmaceutical research program using detailed firm level data we find differences between ex ante announced evaluation criteria and ex post implementation this suggests that judging r d programs on their design rather than their implementation may be misleading we also uncover that the apparent discrimination against non european firms can be interpreted as a premium to having local production facilities overall the program values firms on the basis of criteria such as r d investment and patent spending consistent with empirically tested measures of innovative activity 2004 elsevier b v all rights reserved

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

market incentives and pharmaceutical innovation i study the impact of the orphan drug act oda which established tax incentives for rare disease drug development i examine the flow of new clinical drug trials for a large set of rare diseases among more prevalent rare diseases the oda led to a significant and sustained increase in new trials the impact for less prevalent rare diseases was limited to an increase in the stock of drugs tax credits can stimulate rd yet because they leave revenue margins unaffected tax credits appear to have a more limited impact on private innovation in markets with smaller revenue potential

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

estimating the innovator s dilemma structural analysis of creative destruction in the hard disk drive industry 1981 1998 this paper studies strategic industry dynamics of creative destruction in which firms and technologies experience turnover theories predict that cannibalization between existing and new products delays incumbents innovation whereas preemptive motives accelerate it incumbents cost dis advantage relative to that of entrants would further reinforce these tendencies to empirically assess these three forces i estimate a dynamic oligopoly model using a unique panel data set of hard disk drive manufacturers the results suggest that despite strong preemptive motives and a substantial cost advantage over entrants cannibalization makes incumbents reluctant to innovate which can explain at least 57 percent of the incumbent entrant innovation gap

effect of r d tax credits for smes in japan a microeconometric analysis focused on liquidity constraints this article estimates the effect of research and development r d tax credits for small and medium sized enterprises smes by utilizing the propensity score matching method to correct any possible selection bias this study also examines whether the impact of tax credits differs with firms characteristics such as their industry size and liquidity constraints empirical results show that r d tax credits induce an increase in smes r d expenditures moreover we find that the effect of r d tax credits on liquidity constrained firms is much greater than on unconstrained firms

the financing of research and development evidence on the funding gap for rd 2 evidence for high costs of rd 3 there are limits to venture capital as a solution to the funding gap especially in countries where public equity markets are not highly developed and 4 further study of governmental seed capital and subsidy programs using quasi experimental methods is warranted

firm level productivity spillovers in china s chemical industry a spatial hausman taylor approach this paper assesses the role of intra sectoral spillovers in total factor productivity across chinese producers in the chemical industry we use a rich panel data set of 12 552 firms observed over the period 2004 2006 and model output by the firm as a function of skilled and unskilled labor capital materials and total factor productivity which is broadly defined the latter is a composite of observable factors such as export market participation foreign as well as public ownership the extent of accumulated intangible assets and unobservable total factor productivity despite the richness of our data set it suffers from the lack of time variation in the number of skilled workers as well as in the variable indicating public ownership we introduce spatial spillovers in total factor productivity through contextual effects of observable variables as well as spatial dependence of the disturbances we extend the hausman and taylor 1981 estimator to account for spatial correlation in the error term this approach permits estimating the effect of time invariant variables which are wiped out by the fixed effects estimator while the original hausman and taylor 1981 estimator assumes homoskedastic error components we provide spatial variants that allow for both homoskedasticity and heteroskedasticity monte carlo results show that our estimation procedure performs well in small samples we find evidence of positive spillovers across chemical manufacturers and a large and significant detrimental effect of public ownership on total factor productivity

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

did the tax revolt reduce school performance abstract this paper uses detailed school level data from 49 states to analyze the effects of tax revolt era property tax limitations on school services i find that limitations are associated with larger student teacher ratios and lower cost of living adjusted starting teacher salaries all else equal these results are robust to modelling the results as endogenous and using a variety of measures for whether the limitation binds at particular schools however i find no such evidence that schools subject to limitations have reduced their administrative costs furthermore i find that limitations are associated with lower student performance on mathematics science social studies and reading examinations all else equal

the tax treatment of r d expenditures of multinational enterprises abstract this paper investigates the tax treatment by national governments of r d expenditures of multinational enterprises in a noncooperative world the international tax system is generally shown to discourage r d investments by multinational firms for the special case of symmetric corporate tax rates the multinational is allowed to expense less than the total of its r d expenses worldwide internationalization of the firm s operations and ownership is demonstrated to lead to less generous expensing rules within individual countries and may even eliminate r d tax deductions altogether

r d and internal finance a panel study of small firms in high tech industries since joseph schumpeter economists have argued that internal finance should be an important determinant of r d expenditures yet almost without exception previous empirical studies have not found evidence of such a relation using newly available data the authors investigate this puzzle with a panel of 179 small firms in high tech industries under each estimation strategy they employ the authors find an economically large and statistically significant relationship between r d investment and internal finance their results are consistent with the view that because of capital market imperfections the flow of internal finance is the principal determinant of the rate at which small high tech firms acquire technology through r d copyright 1994 by mit press

do financial constraints hold back innovation and growth evidence on the role of public policy abstract this paper provides evidence that capital market imperfections hold back innovation and growth and that public policy can complement capital markets we deliver the evidence by studying the effects of government funding on the behavior of smes in finland by adapting the methodology recently proposed by rajan and zingales rajan r g zingales l 1998 financial dependence and growth american economic review 88 pp 559 587 to firm level data we show that government funding disproportionately helps firms from industries that are dependent on external finance we demonstrate that the result is economically significant and robust to a variety of tests

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

production and innovation when techniques are tacit the case of education abstract the central theme of this paper is that the conventional economic theory of production does not hold even approximately in a field like education after examining the result of input output studies in education and the effect of government attempts to enhance education effectiveness we provide a sketch of a new production theory for sectors where techniques are poorly articulated and idiosyncratic

consumer willingness to pay to reduce the probability of retail foodborne pathogen contamination abstract the us department of agriculture applies a cost of illness approach to value reductions in morbidity which may understate the projected benefits from proposed food safety improvements by ignoring costs such as pain suffering and worry we use a national survey with a hypothetical food choice experiment to estimate a more comprehensive measure of consumer willingness to pay for food safety improvements our approach differs from previous evaluations of food safety improvements because we 1 provide the respondent with information about the promised change in the probability of pathogen contamination in retail food packages rather than changes in the probability of becoming ill 2 elicit changes in respondents subjective probability of becoming ill and 3 elicit predicted changes in the quantity demanded for products that have enhanced food safety properties we estimate the consumer s choice between a safety enhanced and an existing product the change in subjective probability of contracting foodborne illness associated with the enhanced product and the change in demand for the enhanced product in a manner that recognizes the correlation among unobserved elements the aggregated results suggest benefit estimates that are significantly larger than previous estimates for similar improvements

pro poor agricultural biotechnology can the international research system deliver the goods abstract while global investment in agricultural research by the private sector is increasing with growth in developing country markets and the emergence of new technologies complementary public sector investment is stagnating or declining in many developing countries this review argues that the changing roles of the public and private sectors in generating new scientific knowledge may adversely affect the diffusion of explicitly pro poor technologies technologies that are simultaneously yield enhancing and poverty reducing comparing historical evidence from the green revolution with recent evidence from the emerging era of agricultural biotechnology this review argues that a more pluralistic international system for agricultural research will be more responsive to poverty only if the strategic leadership role of the public sector is strengthened certain research functions are reallocated to the private sector and new policy and organizational mechanisms are used to stimulate pro poor research in and for developing country agriculture

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

r d production structure and rates of return in the u s japanese and german manufacturing sectors a non separable dynamic factor demand model abstract the focus of this paper is an analysis of the production structure the demand for factor inputs and the rates of return in the manufacturing sector of three major industrialized countries the united states japan and germany the analysis is based on a dynamic factor demand model with two variable inputs labor and materials and two quasi fixed inputs capital and rd also for all countries the speed of adjustment for capital is found to be higher than that for r d

the assessment technology policy current research and problems in science and technology policy are reviewed trends in innovative activity in the g 7 economies during the past two decades are summarized and the economic rationale for policy in this area given policy tools currently in use in many countries include tax credits and subsidies the intellectual property system and competition policy ongoing areas of current controversy are the interaction of intellectual property and competition policies environmental and innovation policy standard setting in industries characterized by network externalities and the privatization of scientific research and its consequences copyright 2002 oxford university press

effectiveness of r d tax incentives in small and large enterprises in quebec in this paper we evaluate the effectiveness of r d tax incentives in quebec using manufacturing firm data from 1997 to 2003 originating from r d surveys annual surveys of manufactures and administrative data the estimated price elasticity of r d is 0 10 in the short run and 0 14 in the long run with slightly higher elasticities for small firms than for large firms we show that there is a deadweight loss associated with level based r d tax incentives that is particularly acute for large firms for small firms it is not sizeable enough to suppress the r d additionality at least not for quite a number of years after the initial tax change incremental r d tax credits do not suffer from this deadweight loss and are from that perspective preferable to level based tax incentives

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

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

the demand for a malaria vaccine evidence from ethiopia this study measures the monetary value households place on preventing malaria in tigray ethiopia we estimate a household demand function for a hypothetical malaria vaccine and compute the value of preventing malaria as the household s maximum willingness to pay to provide vaccines for all family members this is contrasted with the traditional costs of illness medical costs and lost productivity our results indicate that the value of preventing malaria with vaccines is about us 36 per household per year or about 15 of imputed annual household income this is on average about twice the expected household cost of illness

examining the link between teacher wages and student outcomes the importance of alternative labor market opportunities and non pecuniary variation researchers using cross sectional data have failed to produce systematic evidence that teacher salaries affect student outcomes these studies generally do not account for non pecuniary job attribu

testing for homotheticity of educational production models since the 1960s the performance of public schools has typically been investigated in the context of educational production functions e g hanushek 1986 studies generally relate educational outcomes such as standardized test scores or graduation rates to quantities and qualities of inputs such as the number and quality of teachers school spending on facilities and family peer group characteristics these educational production functions have been estimated by regression methods e g hanushek 1986 sanders 1993 summers and wolfe 1977 and by nonparametric methods e g fare grosskopf and weber 1989 the studies offer interesting insights on such issues as the effect of class size and teacher quality on student performance and the relative efficiency of schools however little attention has been given to the characteristics of the educational production technology despite the fact that some important policy questions cannot be addressed without knowledge of these characteristics one such characteristic is input homotheticity for multiple educational outcomes outputs and inputs input homotheticity means loosely speaking that each isoquant is a radial expansion or contraction of the isoquant corresponding to unit outcomes outputs see primont and primont 1994 for a formal definition to illustrate suppose that schools must be downsized perhaps as a result of declining enrollments how should downsizing be implemented if the educational production technology is input homothetic then it is economically optimal to reduce input expenditures proportionally but otherwise it is not primont and primont 1994 provide a new test for input homotheticity in this paper we use data on outputs and inputs for eleven missouri school districts to illustrate how to irnplement such a test

technological effects of m as in spanish manufacturing this article explores whether mergers and acquisitions m as generate differentiated impacts on the acquiring firms r d expenditures patents granted and product innovations considering m as as a way of foreign expansion we examine whether the technological effects differ between domestic and foreign owned acquirers assuming that the effects on the technological efforts and performance may differ across industries the availability of statistical information for a stable sample of manufacturing companies in spain during the 1990s allows us to follow a dynamic approach to the issue our findings confirm the existence of differentiated effects on technological inputs and outputs across industries as well as diversity between domestic and foreign owned firms involved in m as copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

catholic schools dropout rates and educational attainment this paper examines the effect of catholic schooling on high school dropout rates and educational attainment particular attention is given to the effect of selection into the catholic school sector after adjusting for self selection we find that sophomores in the catholic schools are still substantially more likely to graduate with their class it is also shown that seniors in the catholic schools are not more likely to acquire more schooling than other seniors if selection is taken into account

evaluating the impact of r d tax credits on innovation a microeconometric study on canadian firms this study examines the effect of r d tax credits on innovation activities of canadian manufacturing firms over the 1997 1999 period the federal and provincial r d tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high technology sectors we investigate the average effect of r d tax credits on a series of innovation indicators such as number of new products sales with new products originality of innovation etc using a non parametric matching approach compared to a hypothetical situation in the absence of r d tax credits recipients of tax credits show significantly better scores on most but not all performance indicators we therefore conclude that tax credits increase the r d engagement at the firm level and that the r d activities induced by fiscal incentives lead to additional innovation output

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

effectiveness and efficiency of sme innovation policy this paper assesses uk innovation policy impact on a large population weighted sample of both service and manufacturing smes by focussing on self reported innovation the study achieves a wider coverage of the effects of sme innovation policy than possible with more traditional indicators propensity score matching indicates that smes receiving uk state support for innovation were more likely to innovate than unsupported comparable enterprises innovating enterprises are shown to have grown significantly faster over the years 2002 2004 when other growth influences are appropriately controlled combining these two results and comparing the outlays on sme innovation policy with the estimated effects suggests that policy was efficient as well as effective there is evidence that sme tax credits were expensive compared with earlier support instruments but the overall high returns estimated suggest that even in times of public spending cuts persisting with sme innovation policy would be prudent

how effective are level based r d tax credits evidence from the netherlands this paper examines the impact of the r d fiscal incentive program on r d by dutch firms taking a factor demand approach we measure the elasticity of firm r d capital accumulation to its user cost econometric models are estimated using a rich unbalanced panel of firm data covering the period 1996 2004 with firm specific r d user costs varying with tax incentives using the estimated user cost elasticity we perform a cost benefit analysis of the r d incentive program we find some evidence of additionality suggesting that the level based program of r d incentives in the netherlands is effective in stimulating firms investment in r d however the hypothesis of crowding out can be rejected only for small firms the analysis also indicates that the level based nature of the fiscal incentive scheme leads to a substantial social dead weight loss

optimal sharing of foodborne illness prevention between consumers and industry the effect of regulation and liability consumers and the food industry can both prevent foodborne illness two questions are explored what is the socially optimal level of preventative effort by each and can tort and regulatory instruments induce such behavior analysis is complicated by two aspects of food safety technology one party s effort can affect the marginal effectiveness of the other party s effort and damage functions can be nonconvex previous analysis of accidents under torts and regulation fails to consider these generalizations indeed results concerning the ability of tort and regulatory instruments to induce first best and second best behavior often contradict previous results in the literature

the impact of research grant funding on scientific productivity in this paper we estimate the impact of receiving an nih grant on subsequent publications and citations our sample consists of all applications unsuccessful as well as successful to the nih from 1980 to 2000 for standard research grants r01s both ols and iv estimates show that receipt of an nih research grant worth roughly 1 7 million leads to only one additional publication over the next five years which corresponds to a 7 percent increase the limited impact of nih grants is consistent with a model in which the market for research funding is competitive so that the loss of an nih grant simply causes researchers to shift to another source of funding

the persistency and volatility of the firm r d investment revisited from the perspective of technological capability abstract the persistency and volatility of firm rd however previous research has found mixed evidence concerning the persistency and volatility of firm rd positive shocks however technological capability offsets the internal cash flow effect and causes persistency in rd negative shocks these imply that r d investment is not a dichotomous decision between persistency and volatility and is conditional on each firm s technological capability

tax incentives for business investment a primer for policy makers in developing countries abstract the use of tax incentives is widespread even though the available empirical evidence on the cost effectiveness of such incentives in stimulating investment is highly inconclusive this paper is primarily intended as a primer on the use of tax incentives for policy makers especially those in developing countries it discusses the objectives cost effectiveness and transparency of implementing tax incentives assesses the comparative merits of alternative forms of such incentives and provides a review of the empirical literature its main conclusions are that the justification for the use of tax incentives should be limited to the rectification of market failures and that the preferred form of tax incentives are those that provide for faster recovery of investment costs

the effects of r d tax credits and allowances in canada abstract in canada as in many other countries that have adopted r d tax credits and allowances there has been considerable controversy over their effectiveness in increasing company financed research and development this study seems to be one of the first systematic attempts to estimate the effects of canada s r d tax credits and allowances the results present a very consistent picture the survey results the econometric results and some simple calculations based on rough measures of the price elasticity of demand for r d all suggest that the special research allowance increased r d expenditures by about 1 percent and that the investment tax credit increased them by about 2 percent these increases seem to be appreciably less than the revenue losses to the government

evaluating the innovation box tax policy instrument in the netherlands 2007 13 patent boxes are tax incentive schemes aimed at stimulating research and development r d in firms by providing favourable tax rates to profits that can be linked to a specific immaterial asset such as a patent because these profits are often hard to separate from other firm profits patent boxes have been argued to be prone to tax shifting of firms and tax competition between nations as they might shift the location of the profits without affecting the location of r d activities whether or not this occurs may also depend on conditions set in the patent box we evaluate the innovation box policy instrument in the netherlands which is essentially a patent box but without the formal requirement of a patent we ask whether the innovation box has an effect on local r d investment of the firm additionality thereby putting the hypothesis of tax shifting to the test we find that the innovation box indeed has a positive effect on r d investment but the average firm that uses the policy tends to use only a part of the tax advantage for extra r d investment

the use of a levy grant system as an alternative to tax based incentives to r d abstract in this paper the effectiveness of an r d levy grant system is considered it is shown that in theory such a scheme can lead to increases in r d and or correct sub optimal allocations to r d in a free market economy operation of such a system is compared with that of a tax based incentive scheme taking account of the experience of the uk with regard to a levy grant system used to stimulate training

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

some tests of the incentive effects of the research and experimentation tax credit abstract the effectiveness of the tax credit for research and experimentation r e expenditures is examined using a panel of firm data for the period 1975 through 1988 using a structural model the results generally indicate that the credit resulted in increased r e spending however the effect of the credit was substantially mitigated by the impacts of net operating loss carryovers and low growth opportunities results also indicate some degree of decreased r e spending as a result of debt restructuring activity tax policy implications are discussed

schools and housing values this study combines historical and quantitative methods to determine the market response to a major nineteenth century american urban architectural form the speculatively built row house the paper estimates a hedonic price index which decomposes the

are firms that received r d subsidies more innovative this paper looks at the effectiveness of r d grants for canadian plants that already benefit from r d tax credits using a non parametric matching estimator we find that firms that benefited from both policy measures introduced more new products than their counterparts that only benefited from r d tax incentives they also made more world first product innovations and were more successful in commercializing their innovations

do the effects of r d tax credits vary across industries a meta regression analysis this paper presents a survey of the micro econometric literature on the effects of r d tax credits on firms innovation activities we focus on one specific aspect that has not received sufficient attention in previous research the sectoral dimension our meta regression analysis mra sets up a new database collecting a large number of firm level studies on the effects of r d tax credits and investigates the factors that may explain differences in the estimated effects that are reported in the literature the main result of the mra analysis is indeed that sectors matter specifically the additionality effect of r d tax credits is on average stronger for smes firms in the service sectors and firms in low tech sectors in countries with an incremental scheme the paper proposes a simple framework to investigate why the innovation and economic effects of r d tax credits vary across sectors and points out new directions and hypotheses for future research

cost and learning efficiency drivers in australian schools a two stage network dea approach this article explore performance issues in australian public schools using a two stage dea network model which accounts simultaneously for both cost and learning efficiency levels in the cost efficiency stage different types of expenses and investments are employed to support a given number of students teachers and administrative staff in the learning efficiency stage these groups of individuals help to produce important outputs related to performance in student tests and school rankings results indicate that australian public schools are heterogeneous policy implications are also discussed

the impact of group based credit programs on poor households in bangladesh does the gender of participants matter this paper estimates the impact of participation by gender in the grameen bank and two other group based micro credit programs in bangladesh on labor supply schooling household expenditure and assets the empirical method uses a quasi experimental survey design to correct for the bias from unobserved individual and village level heterogeneity we find that program credit has a larger effect on the behavior of poor households in bangladesh when women are the program participants for example annual household consumption expenditure increases 18 taka for every 100 additional taka borrowed by women from these credit programs compared with 11 taka for men

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

modeling recreation demand within a random utility framework abstract this paper develops a single site single trip random utility model for describing recreation behavior the model is applied to a 1981 survey of households in the pennsylvania monongahela river basin hicksian benefit estimates derived from it are compared with those from a more conventional travel cost model estimated from the same survey

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

on the bias of the corporate tax against high risk projects this paper demonstrates that the impact of the existing tax law is not uniform across proj ects with different variances of payoffs a bias exists against projects with greater uncer tainty of payoffs which leads to an underinvestment in high risk projects the bias against higher variance projects offers a theoretical justification for such tax incentives as the research and development tax credit i introduction the impact of corporate taxes on firms investment decisions is a problem that has interested economists for years when taxes are levied on income rather than economic profits a wedge is driven between private benefits and social ben efits firms will invest to the point that after tax marginal net present value is zero whereas the socially desirable level is generally the one at which the be fore tax marginal net present value is zero this paper shows that in a world of certainty adjusting the depreciation amount is sufficient to remove the distor tion however under uncertainty the current tax regime with assymetric treat ment of gains and losses creates a bias against projects with high variances of payoffs that cannot be removed simply by juggling the depreciation amount this bias against high risk projects suggests that tax incentives such as the research and development tax credit may be needed to encourage investment in risky projects it is also shown that the favored tax treatment of debt capital may intensify the disincentive to invest in higher variance projects in section ii a model of the firm under taxation and uncertainty is de veloped section iii presents the major results of this research while section iv offers a brief summary of the results

assessing the effect of public subsidies on firm r d investment a survey this survey examines the empirical literature on the relationship between public r d subsidies and private r d investment over the past five decades the survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues we aim to provide further explanations of the possible causes of that heterogeneity in particular we emphasise a set of issues that in our view are critical to understanding the potential effect of public r d subsidies on private r d spending special attention is paid to the dynamic aspects and composition of firm r d the constraints faced by the firm such as financial constraints and the amount and source of public subsidies none of these issues have been investigated in depth we formulate a set of research assumptions to guide future empirical research in this field

patents r d subsidies and endogenous market structure in a schumpeterian economy this study explores the different implications of patent breadth and r d subsidies on economic growth and endogenous market structure in a schumpeterian growth model we find that when the number of firms is fixed in the short run patent breadth and r d subsidies serve to increase economic growth as in previous studies however when market structure adjusts endogenously in the long run r d subsidies increase economic growth but decrease the number of firms whereas patent breadth expands the number of firms but reduces economic growth therefore in accordance with empirical evidence r d subsidy is perhaps a more suitable policy instrument than patent breadth for the purpose of stimulating long run economic growth

what determines the location choice of r d activities by multinational firms abstract we analyse 446 location decisions of r d activities by multinational firms incorporated in the european union over 1999 2006 our results suggest that on average the location probability of a representative r d foreign affiliate increased with agglomeration economies from foreign r d activities human capital proximity to centres of research excellence and the research and innovation capacity of the region further our evidence suggests that in comparison to european multinational firms the effects of patents intensity and proximity to centres of research excellence were stronger in the case of north american multinational firms while government r d expenditure intensity increased the probability of location of r d activities by european multinational firms in the region it did not have a significant effect on the probability of location of r d activities by north american multinational firms

estimating the impact of the r d tax credit on strategic groups in the pharmaceutical industry abstract the economic recovery and tax act of 1981 provided a 25 percent tax credit for increases in research and experimentation expenditures previous studies have shown considerable controversy about the effectiveness of various tax credits this study focuses on the response of the strategic groups in the pharmaceutical industry to the credit four strategic groups were formed using different levels of research intensity research sales and relative cash flow margin cash flow sales the change in research intensity following enactment of the tax credit was estimated the analysis found that the tax credit caused an increase in r d expenditures in addition the r d tax credit appears to have contributed to increased competitive r d spending among the firms in the pharmaceutical industry

tax incentives and r d spending a review of the evidence abstract since 1981 u s firms have been allowed to claim a tax credit for r d spending in excess of some base amount this paper assesses the evidence gathered to date about the effectiveness of the r d tax credit in the united states there is considerable evidence that the r d tax credit has had some effect on the behavior of american firms in the early 1980s but it is not as yet clear how much of the initial response of firms to the credit is due to increases in total r d as opposed to increases in r d that is qualified for the r d credit moreover different empirical approaches produce substantially different estimates of the size of the effect of the r d credit analyses based on time series data imply that the credit has had a substantial effect on r d spending however indirect evidence based on estimates of the price elasticity of demand for r d as well as studies based on more direct evidence from survey data and corporate tax returns imply that the effect of the credit has been rather modest there are several ways in which these divergent estimates of the size of firms responses can be reconciled however each suggested reconciliation points toward using the more modest estimates to gauge the effects of a permanently enacted incentive for r d these estimates imply that had the incremental 25 percent r d credit been made permanent it would have stimulated between 0 35 and 0 93 of additional company funded r d spending per each 1 of tax revenue forgone

fiscal incentives for research and development it is often argued that since the social return to r d exceeds the private return the government should provide incentives for r d expenditure this article considers the issue of the impact of such incentives on the fiscal position of the government using a simple comparative static model in particular it is argued that it is possible that the social return from r d might be sufficient to allow r d incentives to more than pay for themselves on the basis of the international evidence the model is calibrated to examine what values of the key parameters are required in order for this conclusion to hold

r d policy agency costs and innovation in personalized medicine the orphan drug act oda was designed to spur the development of drugs for rare diseases in principle its design also incentivizes pharmaceutical firms to develop drugs for rare subdivisions of more prevalent diseases i find that in response to this incentive firms develop drugs for oda qualifying subdivisions of non rare diseases the impact in these tailored drug markets represents half of the total r d response to the oda i also find that 10 percent of the innovation in subdivided disease drugs induced by the oda would have been conducted without the policy while modest in size this inefficiency suggests that agency problems should be considered when designing innovation policy

do r d tax incentives lead to higher wages for r d workers evidence from the netherlands this paper examines the impact of the dutch r d tax incentive scheme on the wages of r d workers we construct firm specific r d tax credit rates that vary over time following variations in the dutch r d tax incentive program using instrumental variables we estimate a wage sharing model with an unbalanced firm level panel data covering the period 1997 2004 the elasticity of the r d wage with respect to the fraction of the wage supported by the fiscal incentives scheme is estimated at 0 2 in the short run and 0 24 in the long run

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

the value of u s patents by owner and patent characteristics abstract this paper uses renewal data to estimate the value of u s patents controlling for patent and owner characteristics estimates of u s patent value are substantially larger than estimates for european patents however the ratio of u s patent value to r d for firms is only about 3 contrary to a common assertion patents issued to small patentees are much less valuable than those issued to large corporations litigated patents are more valuable as are highly cited patents however patent citations explain little variance in value suggesting limits to their use as a measure of patent quality

public support for innovation and the openness of firms innovation activities this study explores empirically the relationship between publicly funded schemes to support innovation and the openness of firms innovation practices using survey data from more than 5000 firms in 29 european countries we find that support policies for innovation both monetary and non monetary are related to an increase in the degree of openness of individual firms both in terms of the number of external partners with whom they collaborate and the number of open innovation activities they perform however the relationship between support and openness seems to be negatively moderated by the existence of previous innovative activity within the firm public support has more impact on less innovative firms and less influence when the firm is already innovative which could potentially indicate the existence of crowding out effects additionally our results suggest that non financial support is more strongly linked to openness than financial support for policy makers facing salient budgetary constraints this implies that institutions and government policies could potentially play a more important role than money in fostering open innovation this article contributes to the open innovation literature by tapping into the underexplored question of the role of public policies and has crucial implications for academics and policy makers

demand side vs supply side technology policies hidden treatment and new empirical evidence on the policy mix this paper provides new empirical evidence about the impact of various technological policies upon firms innovative behaviour we take into consideration the role of policies for innovative activities and we focus on their interaction while supply side policies such as r d subsidies and tax credits have been both extensively discussed in the literature and empirically investigated the analysis of innovative public procurement is a growing trend in the literature which still lacks robust empirical evidence in this paper we replicate the existing results on supply side policies surmise fresh empirical evidence on the outcome of innovative public procurement and address the issue of possible interaction among the various tools when controlling for the interaction with other policies supply side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools the preliminary evidence suggests that technology policies exert the highest impact when different policies interact

financing technology based small firms in europe what do we know this paper reviews the evidence on financing technology based small firms tbsfs in europe european tbsfs finance new investments by relying primarily on internal funds due to capital market failures induced by asymmetric information european venture capital has caught up with us venture capital but this is mainly because of the growth in uk venture investments it is unclear whether european venture capital has been able to certify the quality and enhance the growth of funded companies compared with the nasdaq there is little development of trading in high tech stocks in europe the so called new markets established in the 1990s collapsed in the wake of the internet bubble crash public venture capital and research and development r d tax incentives seem to have positively affected high tech firms

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

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

the welfare impact of food pathogen vaccines abstract vaccines against several common foodborne pathogens are being developed and could substantially alter the policy tools available to address foodborne illness however little analysis is available to suggest how social welfare would be affected by consumer and industry responses to these new vaccines to address this void we use stated preference data to estimate consumer willingness to pay wtp for food safety vaccines and then simulate the welfare impacts of subsidizing consumer purchases of the vaccine given two different industry responses maintaining current levels of food safety vigilance and reducing food safety vigilance due to a moral hazard response that undermines consumer confidence in food safety to obtain consumer preferences for the vaccine we simultaneously estimate a three equation model that recognizes the recursive nature of responses to questions probing respondents willingness to purchase vaccines and perceptions of the probability and severity of possible foodborne illness incidents and the joint distribution of unobservable components our simulations show large consumer wtp if vaccines are relatively inexpensive while the presence of moral hazard increases respondents willingness to pay and voluntary uptake of vaccine

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

financial innovation in the uk this study employs a national survey of over 1100 british financial firms to ascertain the determinants of financial innovation and their sales success using the logit and the generalized tobit models we find that the likelihood of financial innovation rises with the size of financial firms employee education greater expenditure on research and development the availability of finance and the extent to which firms cooperate with each other perceptions of economic risk and innovation costs are also influential r d cooperation and human capital are the main variables driving the success of financial innovation measured by the percentage share of innovations sold firms in london the south have a significantly greater tendency to innovate though scotland also does well stock broking fund management and related activities are more innovative than firms in the financial intermediation and pension insurance sectors

expenditures and student achievement in illinois abstract this study examines educational outcomes in illinois for the 1989 1990 school year several measures of educational attainment are analyzed including act scores high school graduation rates and the percentage in a high school planning to attend college the most important results are that an increase in average teacher s salary increases act scores and the percentage college bound and an increase in the pupil teacher ratio reduces the graduation rate and the percentage college bound

uk industrial policy old tunes on new instruments this paper discusses the current labour government s industrial policy as most recently reflected in its document on manufacturing strategy in the context of industrial policy in the uk over the last 50 years and the form that it has taken elsewhere in europe it concludes that the thematic priorities for uk industrial policy in the 1960s international competitiveness innovation competition and skills continue to be the key themes of uk policy today the paper presents data that illustrate the gaps that exist in key indicators of performance between the uk and its main economic competitors the difference between the 1960s and the 2000s is that there are new instruments of policy two areas in particular are focused on competition policy and technology policy and an attempt is made to assess the likely effectiveness of these new instruments the paper concludes that the international evidence base for these new approaches is reasonably robust but that it is still too soon to tell if they are having the hoped for impact on the performance of the uk economy copyright 2002 oxford university press

explicit and implicit tax effects of the r d tax credit this paper investigates the effects of the 1981 research and development r d tax credit first by examining the impact of the credit on the level of r d investment and second by estimating the magnitude of the implicit tax created by the credit the two effects are interrelated because an increase in the level of r d investment will increase the demand for r d inputs thus reducing the pretax rate of return from r d activity 1 i test the credit s investment effect using a time series r d spending model that includes both factors from the industrial organization literature to control for nontax effects and an r d credit usability variable to capture the incentive created by the credit previous research has produced mixed evidence on whether the credit had any positive

how large are learning externalities the quantitative features of human capital externalities are not fully understood although static externalities are estimated in some studies learning externalities remain mostly unestimated by calibrating a growth model this article provides an estimate of learning externalities the calibration uses an equilibrium condition that equates private returns on physical capital and human capital the results suggest that sizable learning externalities exist even in a conservative setup the estimated social rate of return on human capital is 9 0 compared to the private rate of return 6 6 therefore human capital externalities are an important source of economic growth