Agglomeration, Innovation, and Spatial Reallocation: The Aggregate Effects of R&D Tax Credits

July 1, 2022

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Format: Chicago

Alexandre Sollaci. Agglomeration, Innovation, and Spatial Reallocation: The Aggregate Effects of R&D Tax Credits, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

I investigate the aggregate effects of R&D tax credits in the US. Because it subsidizes R&D activity and because credit rates vary between states, this policy has both spatial and dynamic effects on the economy. To address this issue, I construct an endogenous growth model with spatial heterogeneity and agglomeration spillovers in innovation. Aggregate outcomes in this model are thus affected by the spatial distribution of the population in the economy, which is itself endogenous and reacts to policy. I use this framework to identify a set of local R&D subsidies that maximize aggregate welfare.

Subject: Credit ratings, Labor, Money, Population and demographics, Production, Productivity, Tax allowances, Taxes, Wages

Keywords: Agglomeration, Aggregate outcome, Credit ratings, Elasticity of agglomeration, Elasticity of congestion, Global, Innovation, Productivity, R&D activity, R&D subsidy, R&D tax credit rate, R&D tax credits, Tax allowances, Wages, Welfare effect

Publication Details

Pages:

92
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/131
Stock No:

WPIEA2022131
ISBN:

9798400212666
ISSN:

1018-5941

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