State Incentives for R&D Activity: Evidence from Biotech
Policy research grant
Over the past two decades, R&D tax credits offered by U.S. states have become widespread and increasingly generous. The proliferation of state tax credits designed to attract biotech companies raises three important questions: 1) First, are the tax incentives effective in achieving their stated objective?; 2) Second, to the extent the incentives do increase R&D within the state, how much of this increase is due to drawing R&D away from other states?; 3) Third, are these subsidies an efficient use of taxpayer money? The issue of the role of state tax incentives to foster local economic development has received much attention in the literature. While much is known about traditional industries, much less is known about high tech industries like biotech. This project will collect and use data on R&D tax credits, and will link the data on tax credits to data on R&D investment and R&D jobs both in and outside the biotech sector, by state and year for the period 1990-2008.