NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

R&D Tax Policy During the Eighties: Success or Failure?

Bronwyn Hall

NBER Working Paper No. 4240 (Also Reprint No. r1872)
Issued in December 1992
NBER Program(s):   PE   PR

R&D Tax policy in the United States during the nineteen-eighties is evaluated. with particular emphasis placed on quantifying the impact of the R&D tax credit on the R&D investment of manufacturing firms. Using publicly available data on R&D spending at the firm level, I estimate an average price elasticity for R&D spending which is in the neighborhood of unity in the short run. Although the effective credit rate is small (less than five percent until 1990), this relatively strong price response means that the amount of additional R&D spending thus induced was greater than the cost in foregone tax revenue. The recent evolution of features of the U.S. corporate tax system which affect R&D is also reviewed and my results are compared with those of previous researchers. The conclusion is that R&D tax credit seems to have had the intended effect, although it took several years for firms to fully adjust. I also argue that although high correlation over time of R&D spending at the firm level makes it difficult to estimate long run effects precisely, the same high correlation makes it probable that these effects are large.

download in pdf format
   (1468 K)

email paper

This paper is available as PDF (1468 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4240

Published: Tax Policy and the Economy, Edited by James Poterba Volume 7, pp. 1-35, (MIT Press, Cambridge), May 1993

Users who downloaded this paper also downloaded these:
Hall and Van Reenen w7098 How Effective are Fiscal Incentives for R&D? A New Review of the Evidence
Hall R&D Tax Policy During the 1980s: Success or Failure?
Hines No Place Like Home: Tax Incentives and the Location of R&D by American Multinationals
Hall and Lerner w15325 The Financing of R&D and Innovation
Mamuneas and Nadiri w5059 Public R&D Policies and Cost Behavior of the US Manufacturing Industries
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us