Template-type: ReDIF-Paper 1.0
Author-Name: Lokshin, Boris
Author-Email: b.lokshin@maastrichtuniversity.nl
Author-Workplace-Name: Maastricht University, and UNU-MERIT
Author-Name: Mohnen, Pierre
Author-Email: mohnen@merit.unu.edu
Author-Workplace-Name: UNU-MERIT, Maastricht University, and CIRANO
Title: How effective are level-based R&D tax credits? Evidence from the Netherlands
Abstract: 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. 
Classification-JEL: O32, O38, H25, H50, C23
Keywords: R&D tax credits; panel data; crowding out; user-cost elasticity
Series: UNU-MERIT Working Papers
Creation-Date: 2010
Number: 040
File-URL: http://www.merit.unu.edu/publications/wppdf/2010/wp2010-040.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2010040