Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec

Baghana, Rufin and Mohnen, Pierre (2009). Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec. UNU-MERIT.

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UNU-MERIT Working Papers

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  • Author Baghana, Rufin
    Mohnen, Pierre
    Title Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec
    Publication Date 2009
    Publisher UNU-MERIT
    Abstract 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 a 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 during 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.
    Keyword R&D tax credits
    Quebec
    Price elasticity of research & development
    JEL O32
    O38
    H25
    H50
    C23
    Copyright Holder UNU-MERIT
    Copyright Year 2009
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 16:24:10 JST