Tax incentives for R&D and firm dynamics (in Finnish with English abstract and summary)

Määttänen NikuMaliranta Mika

We compare different tax incentive schemes for private R&D investments using a numerical model of R&D-investments and firm dynamics. We find that tax incentives that are based on the incremental annual spending increase firms’ R&D spending much more than tax incentives that are based on the level of R&D spending. However, incremental incentives also distort the allocation of R&D personnel across different firms much more than level-based tax incentives. This effect tends to lower aggregate output. We also find that whether the tax benefits are targeted to only profit-making firms, which pay corporate income tax, or given to all firms, does not make a big difference in terms of aggregate R&D spending or aggregate output.

Publication info

Series
Discussion Papers no. 1065
Date
2007
Avainsanat
tutkimus ja kehitys, verokannustimet, yritysdynamiikka
Keywords
research and development, tax incentives, firm dynamics
JEL
H25,O38,L11
Pages
23
Price
10 €
Availability of print version
Language
Finnish