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Do Corporate Taxes Hinder Innovation?

Authors Mukherjee, Abhiroop View this author's profile
Singh, Manpreet
Zaldokas, Alminas View this author's profile
Issue Date 2017
Source Journal of Financial Economics , v. 124, (1), April 2017, p. 195-221
Summary We exploit staggered changes in state-level corporate tax rates to show that an increase in taxes reduces future innovation. A variety of tests, including those based on policy discontinuity at contiguous counties straddling borders of politically similar states, show that local economic conditions do not drive our results. The effect we document is consistent across the innovation spectrum: taxes affect not only patenting and R&D investment but also new product introductions, which we measure using textual analysis. Our empirical results are consistent with models that highlight the role of higher corporate taxes in reducing innovator incentives and discouraging risk-taking. © 2017 Elsevier B.V.
ISSN 0304-405X
Language English
Format Article
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