Effectiveness Of R&D Tax Incentives In Small And Large Enterprises In Québec

In this paper, the authors evaluate the effectiveness of R&D tax incentives in Quebec, using manufacturing firm data from 1997 to 2003 originating from R&D surveys, annual surveys of manufactures and administrative data. The estimated price elasticity of R&D is -0.10 in the short run and -0.14 in the long run, with slightly higher elasticities for small firms than for large firms. They show that there is a deadweight loss associated with level-based R&D tax incentives that is particularly acute for large firms. For small firms it is not sizeable enough to suppress the R&D additionality, at least not during quite a number of years after the initial tax change.