Cora Touchstone

MIT Department: Economics

Undergraduate Institution: Grinnell College

Faculty Mentor: Jonathan Gruber

Research Supervisor: Ian Calaway

Website: LinkedIn

2018 Research Poster

Biography

I’m from Marietta GA, and am a rising senior majoring in Economics and Mathematics at Grinnell College. I am interested in behavioral macroeconomics and hope to use economics as a tool to do research in decision making, crime, and development. I am passionate about increasing access to STEM for minorities and disabled students. Outside of academics, I enjoy cooking and catching up on my favorite shows.

2018 Research Abstract

Funding Innovation: Tax Credits and Research Grants as Incentives for Research and Development in Canada

Cora Touchstone1, Ian Calaway2, and Jonathan Gruber3, Steven Yang

1Grinnell College Department of Economics and Mathematics, 2National Bureau of Economic Research, 3Massachusetts Institute of Technology Department of Economics

The federal government of Canada uses numerous strategies to encourage firms to innovate. The most significant incentives come from the Canadian tax code which offers investment tax credits (ITCs) for research and development expenditures. These ITCs effectively reduce the cost of innovation for the firm. The extent of the reduction varies from year to year and province to province resulting in significant variation even after accounting for R&D expenditures. In this paper, we describe a Stata program written by our team capable of calculating both the quantity of ITCs earned by a firm in the given tax year and the marginal cost of the last dollar spent on R&D. Results using simulated data demonstrate our program’s ability to successfully capture the effect changes in the tax code. Another way Canada motivates research and development is through funding programs that offer grants and loans for R&D projects. During this project, we explored these natural experiments and found that some funding programs have specific interests that might aid in the approval of business development projects. These include, but are not limited to, women entrepreneurship, small and medium sized firms, and projects in the early or development stages. The results from this paper could encourage policy that further advance Canada’s already developed credit program.