Investment stimuli under government present-biased time preferences

Luca Di Corato ()

No 2014:3, Working Paper Series from Swedish University of Agricultural Sciences, Department Economics

Abstract: This paper examines the net benefit accruing to a present-biased government contemplating the option of speeding up investment using a tax cut or an investment subsidy as an incentive. The literature generally suggests the use of an investment subsidy rather than a tax cut. However, this study shows that, depending on the degree of present-biasedness, it may be more advantageous for the government to provide a tax cut.

Keywords: Investment; Tax reduction; Investment subsidy; Quasi-hyperbolic discounting; Real options (search for similar items in EconPapers)
JEL-codes: C61 H20 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2014-03-13
New Economics Papers: this item is included in nep-acc and nep-pbe
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Journal Article: Investment stimuli under government present-biased time preferences (2016)
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