Working Paper: NBER ID: w27109
Authors: Ufuk Akcigit; Stefanie Stantcheva
Abstract: Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.
Keywords: Taxation; Innovation; Economic Growth; Public Policy
JEL Codes: H21; H23; H25; O31; O33; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax policy (H29) | Quantity of innovation (O31) |
| Tax policy (H29) | Quality of innovation (L15) |
| Personal income tax (H24) | Quantity of patents (O34) |
| Personal income tax (H24) | Quality of citations (A14) |
| Tax changes (H29) | Innovation effects (O39) |
| Corporate inventors (O31) | Sensitivity to taxation (H29) |
| Agglomeration effects (R11) | Sensitivity to tax changes (H32) |
| Tax-induced mobility (H31) | Responsiveness to tax policy (H32) |