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Lunchseminar in Economics: Patent Boxes and the Success Rate of Applications

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Speaker: Ronald Davis, University College Dublin, UK
Event date: Wednesday, 30 September 2020 01:00 pm - 02:00 pm
Place: Université du Luxembourg, Campus Kirchberg, 29, avenue JF Kennedy L-1359 Luxembourg,
ONLINE ACCESS

Patent boxes significantly reduce the tax rate applied to income earned from a patent. Existing work finds that those reductions increase the number of patents. That said, not all patents are equally novel. In particular, the patent box encourages the submission of patents of marginal novelty, a selection effect that would reduce the average success rates of patents. At the same time, the increased return to patenting encourages additional effort in application preparation and prosecution, increasing success rates. While this predicts an ambiguous effect, due to lower financing costs, the net impact should be smaller for frequent innovators. We use data from applications to the European Patent Office from 1978 to 2017 and find that the introduction of a patent box increases the average success rate of applications by 4.4 percentage points, with the estimated effect becoming negative for frequent innovators. We further find that this effect is greater when boxes apply only to new innovations and when local development is required to access tax reductions. This suggests that for the frequent innovators, who form the bulk of submissions, patent boxes may indeed be encouraging the submission of marginally-novel applications.

 

Professor Ronald Davies has been a Professor of Economics at University College Dublin since 2008. After earning his Ph.D. at the Pennsylvania State University in 1999, he joined the University of Oregon faculty where he remained until relocating to Dublin where he is currently Head of the School of Economics.

Specializing in trade and foreign direct investment, he has a particular focus on the tax and trade policies that affect globalization. This work has recently been published in The Review of Economics and Statistics, Journal of International Economics, Scandinavian Journal of Economics, and Canadian Journal of Economics. He is Editor-in-Chief of International Tax and Public Finance and an associate editor of Review of International Economics and Economic and Social Review.

 

 

Registration

- Free seminar
- Registration to dem@uni.lu (please specify full name and institution)

Data: DAVIES Ronald 2020.09.30 SZ.pdf 325.33 kB