This paper examines the impact of fiscal incentives on the level of R&D investment. An econometric model of R&D investment is estimated using a new panel of data on tax changes and R&D spending in nine OECD countries over a nineteen year period (1979-1997). We find evidence that tax incentives are effective in increasing R&D intensity. This is true even after allowing for permanent country specific characteristics, world macro shocks and other policy influences. We estimate that a 10 per cent fall in the cost of R&D stimulates just over a 1 per cent rise in the level of R&D in the short-run; and just under a 10 per cent rise in R&D in the long-run.
Authors
![Rachel Cassidy](/sites/default/files/styles/square_desktop/public/2022-08/Rachel_Griffith.jpg?itok=YovGgLq9)
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Nicolas Bloom
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
John Van Reenen
Working Paper details
- DOI
- 10.1920/wp.ifs.1999.9908
- Publisher
- IFS
Suggested citation
N, Bloom and R, Griffith and J, Van Reenen. (1999). Do R&D tax credits work? Evidence from an international panel of countries 1979-1994. London: IFS. Available at: https://ifs.org.uk/publications/do-rd-tax-credits-work-evidence-international-panel-countries-1979-1994 (accessed: 30 June 2024).
More from IFS
Understand this issue
![London skyscrapers](/sites/default/files/styles/square_desktop/public/2022-08/London-skyscrapers_3.jpg?itok=GdgZFf8T)
It’s time to take a firmer grip on companies and competition law
Globalisation, inequality, feeble productivity growth, earnings stagnation, the falling labour share of national income — the most important features of economic life. And one institution binds them together: the firm.
25 April 2022
![Jeremy Hunt outside 10 Downing Street](/sites/default/files/styles/square_desktop/public/2023-02/jeremy-hunt-outside-10-downing-st.jpg?itok=m0Sc2eBL)
Spring Budget 2024: What you need to know
7 March 2024
![Female surgeon](/sites/default/files/styles/square_desktop/public/2024-04/female-surgeon-2.jpg?itok=DxoZaqMs)
If you can’t see it, you can’t be it: role models influence female junior doctors’ choice of medical specialty
24 April 2024
Policy analysis
![Shopping street](/sites/default/files/styles/square_desktop/public/2024-06/Street-scene-.jpg?itok=R39cR6Xp)
How do the last five years measure up on levelling up?
19 June 2024
![Teesside](/sites/default/files/styles/square_desktop/public/2023-03/Teesside-bridge.jpg?itok=WrlTNCfj)
Freeports: What are they? What do we know? And what will we know?
10 March 2023
![Solent harbour](/sites/default/files/styles/square_desktop/public/2023-03/Solent-harbour.jpg?itok=t1e2xBX6)
Freeports and Investment Zones – what sorts of things should we consider when assessing whether they are good policy?
10 March 2023
Academic research
![City of London skyline](/sites/default/files/styles/square_desktop/public/2022-08/City-of-london-skyline.jpg?itok=PtMJsac8)
Firms and inequality
3 March 2022
![Working paper cover](/sites/default/files/styles/portrait/public/2022-11/WP202246-Technology-skills-and-performance-the-case-of-robots-in-surgery.jpg?itok=ChRdRkD5)
Technology, skills, and performance: the case of robots in surgery
7 November 2022
![Overconfidence and Technology Adoption in Health Care](/sites/default/files/styles/portrait/public/2022-08/WP202233-Overconfidence-and-Technology-Adoption-in-Health-Care.jpg?itok=F7pu6atQ)
Overconfidence and technology adoption in health care
31 August 2022