Working Paper #2009-001
Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec
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.
- 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
Cite this as
APA 7th ed.Baghana, R., & Mohnen, P. (2009). Effectiveness of R&D Tax Incentives in Small and Large Enterprises in Québec (UNU-MERIT Working Paper No. 2009-001). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=3583