Abstract
This paper estimates and evaluates the contributions of R&D tax incentives and publicly financed R&D investment policies in promoting growth of output and privately funded R&D investment in US manufacturing industries. Publicly financed R&D induces cost savings but crowds out privately-financed R&D investment while the incremental R&D tax credit and the immediate deductibility provision of R&D expenditures have a significant impact on privately financed R&D investment. The optimal mix of both instruments is an important element for sustaining a balanced growth in output and productivity in the manufacturing sector.
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