Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250491 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14830
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study how profit taxation affects plants' R&D spending and innovation activities. Relying on geocoded survey panel data which approximately covers the universe of R&D-active plants in Germany, we exploit around 7,300 changes in the municipal business tax rate over the period 1987–2013 for identification. Applying event study models, we find a negative and statistically significant effect of an increase in profit taxation on plants' R&D spending with an implied long-run elasticity of −1.25. Reductions in R&D are particularly strong among more credit-constrained plants. In contrast, homogeneity of effects across the plant size distribution questions policy makers common practice to link targeted R&D tax incentives to plant size. We further find lagged negative effects on the (citation-weighted) number of filed patents.
Subjects: 
corporate taxation
firms
R&D
innovation
patents
JEL: 
H25
H32
O31
O32
Document Type: 
Working Paper

Files in This Item:
File
Size
3.23 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.