American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
How Effective Are R&D Tax Incentives? Reconciling the Micro and Macro Evidence
American Economic Journal: Economic Policy
(pp. 383–422)
Abstract
Recent firm-level studies find R&D tax incentives to be much more effective at stimulating firms' R&D investment than aggregate analyses suggest. Based on a distributed analysis of official R&D survey and administrative tax relief microdata for 19 OECD countries, we show that two factors can reconcile these contrasting results. First, the limited uptake of R&D tax incentives in most countries makes aggregate studies underestimate the effectiveness of R&D tax incentives. Secondly, R&D tax incentives are (much) less effective for large and R&D-intensive firms, which account for a small share of R&D-performing firms but most aggregate R&D tax relief.Citation
Appelt, Silvia, Matěj Bajgar, Chiara Criscuolo, and Fernando Galindo-Rueda. 2026. "How Effective Are R&D Tax Incentives? Reconciling the Micro and Macro Evidence." American Economic Journal: Economic Policy 18 (4): 383–422. DOI: 10.1257/pol.20240883Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
- L25 Firm Performance: Size, Diversification, and Scope
- O31 Innovation and Invention: Processes and Incentives