UNU-MERIT Working Papers Series
Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec
Rufin Baghana & Pierre Mohnen #2009-001In 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.
Keywords: R&D tax credits, Quebec, price elasticity of R&D
JEL codes: O32, O38, H25, H50, C23
UNU-MERIT Working Papers
ISSN 1871-9872
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