Intangible Investment and Current Tax Reforms

Paul Schreyer and W. Steven Clark

Canadian Journal of Economics, 1991, vol. 24, issue 4, 873-87

Abstract: This paper introduces intangible capital into a firm model of intertemporal optimization. It is assumed that an increasing stock of intangible capital shifts outward the firm's demand curve and so improves its competitiveness. Unlike tangible capital, intangible investment can immediately and entirely be written off. These specific features are used to investigate long-run and dynamic effects of tax reforms on investment in intangible assets. It is concluded that both the stock of intangible capital and the speed of adjustment toward the optimal stock may fall given the stylized features of current tax reforms.

Date: 1991
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