The race for R&D subsidies: evaluating the effectiveness of tax credits in Italy

Author/s Claudia Cantabene, Leopoldo Nascia
Publishing Year 2014 Issue 2014/3
Language Italian Pages 26 P. 133-158 File size 122 KB
DOI 10.3280/POLI2014-003006
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

In Italy, between 2007 and 2009, the public support to innovation was focused on tax credit for business R&D. However, one year after its introduction, the Italian government limited the diffusion of such benefit by setting an upper threshold to potentially forgone tax revenue and introducing an electronic selection procedure which made the access to tax credit by firms a random process. This gave us the chance of evaluating the economic impact of this subsidy by designing a quasi-experiment. Exploiting original evidence from administrative and statistical sources, it is possible to argue that the Italian tax credit 2007-2009 had been successful in stimulating private R&D expenditure and that a R&D cost elasticity of around 1.6 could be estimated.

Keywords: R&D investment, tax credit, additionality

Jel codes: C14, H32, O32

  1. Malerba F. 2002. Sectoral systems of innovation and production. Research Policy, 31 (2): 247-264.
  2. Abadie A. 2005. Semiparametric difference-in-differences estimators. Review of Economic Studies, 72 (1): 1-19, DOI: 10.1111/0034-6527.00321
  3. Aghion P., Bloom N., Blundell R., Griffith R., Howitt P. 2005. Competition and innovation: an inverted-U relationship. The Quarterly Journal of Economics, 120 (2): 701-728, DOI: 10.1093/qje/120.2.701
  4. Arrow K. 1962. The economic implications of learning by doing. Review of Economic Studies, 29 (2): 155-173.
  5. Ballot G., Fakhfakh F., Taymaz E. 2001. firms’ human capital, R&D and performance: a study on french and Swedish firms. Labour Economics, 8 (4): 443-462.
  6. Becker G. 1962. Investment in human capital: a theorical analysis. Journal Political Economy, 70 (5): 1-49.
  7. Berger P. 1993. Explicit and implicit effects of the R&D tax credit. Journal of Accounting Research, 31 (2): 131-171.
  8. Bloom N., Griffith R., Van Reenen J. 2002. Do R&D tax credits work? evidence from a panel of countries 1979-1997. Journal of Public Economics, 85 (1): 1-31.
  9. Bronzini R., Iachini E. 2010. Are subsidys for R&D effective? evidence from a regression discontinuity approach. Temi di Discussione della Banca d’Italia 791.
  10. Malerba F., Orsenigo L. 1995. Schumpeterian patterns of innovation. Cambridge Journal of Economics, 19 (1): 47-65.
  11. Mulkay B., Mairesse J. 2013. The R&D tax credit in france: assessment and ex ante evaluation of the 2008 reform. Oxford Economic Papers, 65 (3): 746-766, DOI: 10.3386/w19073
  12. Nelson R.R. 1959. The simple economics of basic scientific research. Journal of Political Economy, 67 (3): 297-306.
  13. Nelson R.R., Phelps E. 1966. Investment in humans, technological diffusion, and economic growth. American Economic Review, 2 (3): 69-75.
  14. Nelson R.R., Winter S.G. 1982. An Evolutionary Theory of Economic Change. Harvard University Press: Cambridge (Mass.).
  15. Potì B., Cerulli G. 2010. La valutazione ex-post di uno strumento di politica della ricerca industriale: modello analitico, processo di realizzazione, eterogeneità degli effetti. L’Industria, 31 (2): 307-334, DOI: 10.2139/ssrn.2201955
  16. Schumpeter J. 1934. The Theory of Economic Development. Harvard University Press: Cambridge (Mass.).
  17. Schumpeter J. 1943. Capitalism, Socialism and Democracy. Harper: New York.
  18. Warda J. 2006. Tax treatment of business investments in intellectual assets: an international comparison. STI Working Paper 2006/4.
  19. Winter S.G. 1984. Schumpeterian competition in alternative technological regimes. Journal of Economic Behavior and Organization, 5 (3-4): 137-158.
  20. Winter S.G. 2006. Toward a neo-Schumpeterian theory of the firm. Industrial and Corporate Change, 15 (1): 125-141, DOI: 10.1093/icc/dtj006
  21. Mairesse J., Mulkay B. 2004. Une évaluation du crédit d’impôt recherché en france (1980-1997). Revue d’Économie Politique, 114 (6): 747-778.
  22. Lokshin B., Mohnen P. 2007. Measuring the effectiveness of R&D tax credits in the Netherlands. UNU-MERIT Working Paper 2007-025.
  23. Lee K., Lim c. 2001. The Technological regimes, catch-up and leapfrogging: findings from the Korean industries. Research Policy, 30 (3): 459-483.
  24. Imbens G., Wooldridge J. 2007. What’s new in econometrics?. lecture notes from NBER Summer Institute, published online.
  25. Ientile D., Mairesse J. 2009. A policy to boost R&D: Does the R&D tax credit work?. EIB Papers, 14 (1): 144-169.
  26. Nines J.R. Jr. 1993. On the sensitivity of R&D to delicate tax changes: the behavior of US multinationals in the 1980s, in Giovannini A., Hubbard R.G., Slemrod J. (eds.) Studies in International Taxation. University of Chicago Press: Chicago.
  27. Hall B., Van Reneen J. 2000. How effective are fiscal subsidys for R&D: a review of the evidence. Research Policy, 29 (4-5): 449-469.
  28. Hall B.H. 1993. R&D tax policy during the eighties: success or failure?. Tax Policy and the Economy, 7: 1-36.
  29. Haegeland T., Moen J. 2007. Input additionality in the Norwegian R&D tax credit scheme. Report 2007/47.
  30. Garcia A., Mohnen P.A. 2010. Impact of government support on R&D and innovation. UNU-MERIT Working Paper #2010-055.
  31. Fazzari S., Hubbard R.G., Petersen B.C. 1988. Financing constraints and corporate investment. Brookings Papers on Economic Activity, 1: 141-195.
  32. Fantino D., Cannone G. 2010. The evaluation of the efficacy of the R&D European funds in Piedmont, mimeo.
  33. Eissa N., Liebman J.B. 1996. Labour supply response to the earned income tax credit. Quarterly Journal of Economics, 111 (2): 605-637.
  34. Eisner R., Albert S.H., Sullivan M.A. 1984. The new incremental tax credit for R&D: subsidy or dissubsidy?. National Tax Journal, 37 (2): 171-183.
  35. Duguet E. 2010. The effect of the R&D tax credit on the private funding of R&D: an econometric evaluation on french firm level data. SSRN Working Paper 1592988.
  36. de blasio G., Fantino D., Pellegrini G. 2011. Evaluating the impact of innovation subsidies: evidence from an unexpected shortage of funds. Temi di Discussione della Banca d’Italia 792.
  37. Czarnitzki D., Hanel P., Rosa J.M. 2011. Evaluating the impact of R&D tax credits on innovation: a microeconometric study on canadian firms. Research Policy, 40 (2): 217-229.
  38. Czarnitzki Dirk., Binz Hanna L. 2008. R&D investment and financing constraints of small and medium-sized firm. ZEW Discussion Papers 08-047.
  39. Cosconati M., Sembenelli A. 2010. Firm subsidies and the innovation output: what can we learn by looking at multiple investment inputs?. Report IRVAPP 2010-03.
  40. Colonna f. 2014. Innovation and human capital: theory and evidence from Italy, mimeo.
  41. Cohen W.M., Levin R. 1989. Empirical studies of innovation and market structure, in Schmalensee R., Willig R.D. (eds.) Handbook of Industrial Organization. North Holland: Amsterdam.
  42. Cerulli G., Potì B. (eds.) 2012. Special issue on evaluating the effect of public policies on corporate R&D and innovation: processes and behaviours, measurement methods and indicators. World Review of Science, Technology and Sustainable Development, 9 (2-3-4): 96-313.
  43. Bugamelli M., Cannari L., Lotti F., Magri S. 2012. Il gap innovativo del sistema produttivo italiano: radici e possibili rimedi. Questioni di Economia e Finanza (Occasional Papers) della Banca d’Italia 121.

  • The intensity of business R&D in Italy: why reducing the gap with the EU is possible and worthwhile Alessandro Sterlacchini, in Economia e Politica Industriale /2017 pp.245
    DOI: 10.1007/s40812-016-0068-z
  • R&D tax incentives in EU countries: does the impact vary with firm size? Alessandro Sterlacchini, Francesco Venturini, in Small Business Economics /2019 pp.687
    DOI: 10.1007/s11187-018-0074-9
  • How Does the Evolution of R&D Tax Incentives Schemes Impact Their Effectiveness? Evidence From a Meta-Analysis Florence Blandinières, Daniela Steinbrenner, in SSRN Electronic Journal /2021
    DOI: 10.2139/ssrn.3805605
  • Effectiveness of R&D subsidies during the crisis: firm-level evidence across EU countries David Aristei, Alessandro Sterlacchini, Francesco Venturini, in Economics of Innovation and New Technology /2017 pp.554
    DOI: 10.1080/10438599.2016.1249543
  • Liquidity and Firms’ Response to Fiscal Stimulus Antonio Acconcia, Claudia Cantabene, in The Economic Journal /2018 pp.1759
    DOI: 10.1111/ecoj.12499
  • The interconnection between fiscal policy and foreign direct investment with R&D: Insights from East Asian countries Sadik Aden Dirir, in Upravlenets /2023 pp.15
    DOI: 10.29141/2218-5003-2023-14-4-2

Claudia Cantabene, Leopoldo Nascia, The race for R&D subsidies: evaluating the effectiveness of tax credits in Italy in "ECONOMIA E POLITICA INDUSTRIALE " 3/2014, pp 133-158, DOI: 10.3280/POLI2014-003006