The effect of investment tax credit: Evidence from an atypical programme in Italy

Raffaello Bronzini (), Guido de Blasio (), Guido Pellegrini () and Alessandro Scognamiglio ()
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Guido de Blasio: Bank of Italy, Economic Research Department
Guido Pellegrini: University of Bologna
Alessandro Scognamiglio: Bank of Italy, Catanzaro Branch, Economic Research Unit

No 661, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research Department

Abstract: This paper examines how business investment responds to investment tax credit, as enacted by ItalyÂ’s Law 388/2000. To assess whether the programme made investments possible that otherwise would not have been made, it exploits some features of the tax credit scheme, such as the fact that some Italian regions are not deemed eligible or that the amount of the bonus differs across eligible regions. Although the programme was fiscally unsustainable, and was therefore downsized well ahead of the expiry date, our findings suggest that it has been effective in stimulating investment.

Keywords: investment incentives; state aid (search for similar items in EconPapers)
JEL-codes: E22 H25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: Written 2008-04
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