The Effects of R&D Tax Credits and Subsidies on Private R&D in Mexico
Résumé
This research studies the effects of a R&D tax credit and a R&D subsidy in Mexico The Mexican tax credit removed the usual market oriented traits that define most tax credits. It essentially acted as a « deferred" subsidy, as firms got a discount on their corporate tax at the end of the fiscal year. Whereas the subsidy granted the funds at the start of the R&D project. My estimates show that both policies had a positive impact on innovation personnel, but the subsidy's impact was larger. As for patents, the impacts are less clear but favor the subsidy over the tax credit. The subsidy appears to have allowed less profitable firms to take on their R&D projects. This might have driven the larger subsidy e_ects. The awarding procedure in both programs is similar. Firms submitted their R&D projects to a non tax collecting institution. The projects were evaluated according to detailed guidelines. The awarded projects were selected based on the evaluations. The guidelines allow to construct a set of conditioning variables in a matching estimation approach. In addition, I use the difference-in-difference matching method to purge time-invariant unobservables.
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