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Schwab, Thomas, and Maximilian Todtenhaupt: Thinking outside the box: The cross-border effect of tax cuts on R&D, Journal of Public Economics, 2021, 204, 104536, Online 05.11.2021.

Abstract

We analyze how a reduction of the tax rate on corporate income from intellectual property (IP) in one country, known as a patent box regime, affects corporate R&D activity in other countries. Combining data on patents and multinational corporation networks, we show that the cross-border effect of tax policy changes depends on whether co-location of the IP and the underlying R&D activity is required. Patent boxes without such a requirement increase patent output in other countries. Patent boxes with such a requirement reduce patent output abroad but only when relocation costs for R&D activity are small.

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