Comments on: Globalization and Inequality in Innovation: A Perspective on US R&D Tax Credit Policy by: Belenkiy, Li, and Xu

Transcription

1 Comments on: Globalization and Inequality in Innovation: A Perspective on US R&D Tax Credit Policy by: Belenkiy, Li, and Xu Teresa Fort Dartmouth Tuck & NBER 2019 AEA Annual Meeting - Atlanta Fort (Dartmouth) Discussion 01/04/ / 18

2 Main questions in paper How does US R&D tax policy affect small/medium firms? How does import competition affect R&D investment? How do these relationships differ across industries? How do tax policy and import competition interact with each other? Fort (Dartmouth) Discussion 01/04/ / 18

3 Main results in paper R&D tax policy change in 2009 disproportionately favors small/medium firms R&D tax policies relative benefit to small/medium vs. large firms varies by industry Negative effect of import competition on innovation decreases with R&D inequality R&D inequality is positively correlated with R&D capital, but negatively correlated with patenting Fort (Dartmouth) Discussion 01/04/ / 18

4 Data sources Compustat data on US public firms from World Input-Output Database State and federal R&D tax credits Great data collection efforts here! Use to construct user cost of R&D capital Fort (Dartmouth) Discussion 01/04/ / 18

5 The R&D inequality index Paper focuses on how tax policy affects small/medium enterprises R&D inequality index: relative responsiveness of R&D expenditure by large versus small firms to R&D tax credit RDI = 1 SMEsEligibleQual/TotalSMEs LargeEligbleQual/TotalLarge Relative share of small/medium enterprises affected by tax policy To qualify, firms must meet at least some base R&D expenditure To be eligible, firms must have tax liabilities Fort (Dartmouth) Discussion 01/04/ / 18

6 R&D inequality index differs across sectors Fort (Dartmouth) Discussion 01/04/ / 18

7 Estimating relationship between R&D and tax policy Estimate relationship between R&D stock, R&D inequality index, and import competition RDStock ijt = β 0 + β 1 IPR jt 1 + β 2 RDI jt 1 + β 3 ICR jt 1 RDI jt 1 + β F Firm jt 1 + γ i + ζ jt + ε ijt Fort (Dartmouth) Discussion 01/04/ / 18

8 Relationship between R&D and tax policy Dependent variable is log(r&d capital) [1&2] or TFP [3] Fort (Dartmouth) Discussion 01/04/ / 18

9 2009 policy change disproportionately affects SMEs 2009 ASC: alternative simplified credit for tax purposes Fort (Dartmouth) Discussion 01/04/ / 18

10 Estimating relationship between patents and tax policy Dependent variable is DHS growth rate in patent counts Fort (Dartmouth) Discussion 01/04/ / 18

11 Estimating relationship between patents and tax policy Dependent variable is DHS growth rate in patent counts Fort (Dartmouth) Discussion 01/04/ / 18

12 Comment 1: The Sample and SMEs Small and medium enterprises large focus of paper SMEs importance in R&D does seem to grow over time Source: Foster, Grim, and Zolas (2016) Fort (Dartmouth) Discussion 01/04/ / 18

13 Comment 1: The Sample and SMEs Analysis based on public firms in Compustat data Firms with 1+ year of positive R&D expenditure between This is a highly selected sample: 3,007 firms 2007 Census of Manufactures: 250,300 firms Hard to study SMEs with Compustat Authors define SMEs based on sales distribution in sample Probably not many/any small firms using traditional definitions Davis et al. (2006) show opposite volatility patterns for public vs. all firms Fort (Dartmouth) Discussion 01/04/ / 18

14 Comment 2: Measuring Import Competition Import competition at the industry level measured as ICR jt = u RD jt RD ut VAX jt Fort (Dartmouth) Discussion 01/04/ / 18

15 Comment 2: Measuring Import Competition Import competition at the industry level measured as ICR jt = u RD jt RD ut VAX jt Four comments on this: Endogenous to the amount of an R&D done by industry Fort (Dartmouth) Discussion 01/04/ / 18

16 Comment 2: Measuring Import Competition Import competition at the industry level measured as ICR jt = u RD jt RD ut VAX jt Four comments on this: Endogenous to the amount of an R&D done by industry VAX is about production fragmentation, not import competition Fort (Dartmouth) Discussion 01/04/ / 18

17 Comment 2: Measuring Import Competition Import competition at the industry level measured as ICR jt = u RD jt RD ut VAX jt Four comments on this: Endogenous to the amount of an R&D done by industry VAX is about production fragmentation, not import competition Endogeneity concerns are still a concern for this measure Fort (Dartmouth) Discussion 01/04/ / 18

18 Comment 2: Measuring Import Competition Import competition at the industry level measured as ICR jt = u RD jt RD ut VAX jt Four comments on this: Endogenous to the amount of an R&D done by industry VAX is about production fragmentation, not import competition Endogeneity concerns are still a concern for this measure What is changing and when? Fort (Dartmouth) Discussion 01/04/ / 18

19 Comment 3: Motive for examining import competition? What do we want to learn from import competition? Negative demand shock Increased fragmentation of production Fort (Dartmouth) Discussion 01/04/ / 18

20 Comment 3: Motive for examining import competition? What do we want to learn from import competition? Negative demand shock Increased fragmentation of production Differential impact of foreign sourcing based on firm size? Effect of China Shock on Firm Size Distribution x Growth in Sales Percentiles size distribution Source: Antràs, Fort, and Tintelnot (2017) Fort (Dartmouth) Discussion 01/04/ / 18

21 Comment 4: Understanding the patent data Authors show patent counts by technology class Computer and electronic counts too low Fort (Dartmouth) Discussion 01/04/ / 18

22 Comment 4: Understanding the patent data Computer and electronics fastest growing patent counts Source: Autor et al., forthcoming Fort (Dartmouth) Discussion 01/04/ / 18

23 Comment 5: More to exploit rich policy data Nice contribution of paper is compiling policy data across states Interesting to exploit that variation more fully Lucking 2018 exploits R&D tax credit variation across states to assess relationship between offshoring and R&D Fort (Dartmouth) Discussion 01/04/ / 18