Short-Term Tax Cuts, Long-Term Stimulus

James Cloyne, Joseba Martinez, Haroon Mumtaz and Paolo Surico

No 30246, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the persistent effects of temporary changes in U.S. federal corporate and personal income tax rates using a narrative identification approach. A corporate income tax cut leads to a sustained increase in GDP and productivity, with peak effects between five and eight years. R&D spending and capital investment display hump-shaped responses while hours worked and employment are much less affected. In contrast, personal income tax cuts trigger a short-lived boost to GDP, productivity and hours worked but have no long-term effects. We develop and estimate an endogenous growth model with variable factor utilization and show that these features generate a pro-cyclical response of productivity which is key to account for our empirical findings.

JEL-codes: E23 E62 H24 H25 H31 H32 O32 (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: ME
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.nber.org/papers/w30246.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30246

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30246

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().