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

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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 131
Language:
English
Publication Date:
01 Jul 2022
DOI:
https://doi.org/10.5089/9798400212666.001
ISBN:
9798400212666
ISSN:
1018-5941
Pages:
92
Keywords:
agglomeration; innovation; R&D tax credits; R&D activity; R&D subsidy; R&D tax credit rate; aggregate outcome; Tax allowances; Credit ratings; Productivity; Wages; Global; elasticity of agglomeration; welfare effect; elasticity of congestion
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 131