American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Tax Credits and Small Firm R&D Spending
American Economic Journal: Economic Policy
(pp. 1–21)
Abstract
In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference-in-difference estimates show a 17 percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.Citation
Agrawal, Ajay, Carlos Rosell, and Timothy Simcoe. 2020. "Tax Credits and Small Firm R&D Spending." American Economic Journal: Economic Policy 12 (2): 1–21. DOI: 10.1257/pol.20140467Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- L25 Firm Performance: Size, Diversification, and Scope
- O32 Management of Technological Innovation and R&D
- O38 Technological Change: Government Policy