Working Paper: NBER ID: w24982
Authors: Ufuk Akcigit; John Grigsby; Tom Nicholas; Stefanie Stantcheva
Abstract: This paper studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We build a panel of the universe of inventors who patent since 1920, and a historical state-level corporate tax database with corporate tax rates and tax base information, which we link to existing data on state-level personal income taxes and on other economic outcomes. Our analysis focuses on the impact of personal and corporate income taxes on individual inventors (the micro level) and on states (the macro level), considering the quantity and quality of innovation, its location, and the share produced by the corporate rather than the non-corporate sector. We propose several identification strategies, all of which yield consistent results. We find that higher taxes negatively impact the quantity and the location of innovation, but not average innovation quality. The state-level elasticities to taxes are large and consistent with the aggregation of the individual level responses of innovation produced and cross-state mobility. Corporate taxes tend to especially affect corporate inventors’ innovation production and cross-state mobility. Personal income taxes significantly affect the quantity of innovation overall and the mobility of inventors.
Keywords: Taxation; Innovation; Corporate Taxes; Personal Taxes; Inventors
JEL Codes: H24; H25; H31; J61; O31; O32; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quantity of innovation (O36) | average quality of innovation (L15) |
| tax policies (H29) | differentiated impacts on various types of inventors (O31) |
| personal and corporate income taxes (H24) | quantity of innovation (O36) |
| corporate taxes (H25) | corporate inventors' innovation output (O36) |
| corporate taxes (H25) | cross-state mobility of inventors (J61) |
| personal income taxes (H24) | mobility of inventors (J61) |
| personal income taxes (H24) | likelihood of inventors having patents (O31) |