Corporate taxation and the quality of research and development


Ernst, Christof ; Richter, Katharina ; Riedel, Nadine


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URL: https://ub-madoc.bib.uni-mannheim.de/33173
URN: urn:nbn:de:bsz:180-madoc-331734
Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ZEW Discussion Papers
Volume: 13-010
Place of publication: Mannheim
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H3 , H7 , J5,
Keywords (English): Corporate taxation , patent quality , micro data
Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been pro- vided in the form of special tax allowances and tax credits. In recent years, sev- eral countries moreover reduced their income tax rates on R&D output (patent boxes). Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, be- yond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on cor- porate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potential and innovation level. The effect is statistically signifi- cant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality.

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Ernst, Christof ; Richter, Katharina ; Riedel, Nadine (2013) Corporate taxation and the quality of research and development. Open Access ZEW Discussion Papers Mannheim 13-010 [Working paper]
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