Akcigit, Grigsby, Nicholas & Stantcheva (2022): Taxation and Innovation in the Twentieth Century

Summary

Akcigit, Grigsby, Nicholas and Stantcheva, "Taxation and Innovation in the Twentieth Century" (Quarterly Journal of Economics 137(1), 2022, 329–385), construct a panel of every US inventor since 1920 (from patent records) matched to a newly built database of historical state-level personal and corporate income tax rates, exploiting within-state changes over a century of variation.[1]

Findings

Higher personal and corporate income taxes negatively affect the quantity of inventive activity and shift its location across states, with quality (patent citations) moving in proportion to quantity so that average quality is largely unaffected.[1] The magnitudes are large. At the macro (state) level the authors report elasticities of "0.8 to 1.8 for personal net-of-tax rates and 1.3 to 2.8 for corporate net-of-tax rates" for the number of patents, depending on the controls (verified against the NBER working-paper text this session). At the individual level the elasticity of an inventor's patents to the personal net-of-tax rate is "around 0.8" and of citations "around 1"; corporate inventors' patents respond to the corporate net-of-tax rate with an elasticity of 0.49. Inventors are also significantly less likely to locate in high-tax states — mobility, not just effort, drives much of the state-level corporate response.

Role in the Wiki's Argument — the Inference Gap Both Sides Must Respect

This is the strongest empirical warning that taxing the returns to innovation is not free — the evidence base of the Schumpeterian objection to generalized rent capture. Two disciplined readings:

• What it establishes: innovation responds to the net-of-tax prize. The naive Geoist move — treat all above-normal corporate returns as costlessly taxable economic rent — is empirically wrong for the inventive margin; part of those returns are quasi-rents doing incentive work.
• What it does not establish: the study covers ordinary income taxes, which burden the normal return, loss-making years, and marginal investment — precisely what rent-only bases (ACE, cash-flow) are designed to exempt. No equivalent study of a rent-only base exists, in either direction. Extrapolating this result against well-designed rent taxation is inference, not evidence — and the wiki's objection page carries that gap inside the steelman.

See Also

• Objection: Taxing quasi-rents kills innovation — where this evidence anchors
• Quasi-Rent · Allowance for Corporate Equity
• Corporate profits increasingly reflect economic rents — the diagnosis side

Sources

1. Ufuk Akcigit, John Grigsby, Tom Nicholas & Stefanie Stantcheva (2022), "Taxation and Innovation in the Twentieth Century," Quarterly Journal of Economics 137(1), 329–385 (working-paper version: NBER WP 24982, rev. March 2021) — used for all findings above; headline elasticities (macro 0.8–1.8 personal / 1.3–2.8 corporate; individual 0.8 patents / ~1 citations) verified against the NBER PDF this session. OUP · NBER WP 24982