Taxation and Innovation: What Do We Know?
This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.
Chapter in forthcoming NBER book Innovation and Public Policy, Austan Goolsbee and Benjamin Jones, editors
Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.
Taxation and Innovation: What Do We Know?, Ufuk Akcigit, Stefanie Stantcheva