The R&D Tax Credit in France: Assessment and Ex-Ante Evaluation of the 2008 Reform

Abstract

This article presents an econometric analysis of the direct effects of the R&D tax credit (RTC) on private R&D in France and proposes an ex ante evaluation of the major reform implemented in 2008. We first estimate an error correction model of a dynamic R&D demand function on a large panel data of R&D doing firms, obtaining a preferred estimate of -0.4 for the long run elasticity of the user cost of R&D capital. We then perform a micro-simulation of the effects of the 2008 RTC reform that shows that the implicit long run budget multiplier would be about 0.7.