Tax Policy and Business Investment in the United States: Evidence from the 1980s

Robert Corker, Owen Evans and Lloyd Kenward
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Robert Corker: International Monetary Fund
Owen Evans: International Monetary Fund
Lloyd Kenward: International Monetary Fund

IMF Staff Papers, 1989, vol. 36, issue 1, 31-62

Abstract: The behavior of business fixed investment in the United States in the 1980s is examined. A background discussion of the long-term behavior of the components of business fixed investment is provided, setting the context for the empirical analysis. A standard neoclassical model of business fixed investment is specified and estimated, with output and the cost of capital the primary explanatory variables. Simulation experiments are then conducted with a view to assessing the importance of various contributing factors--in particular tax policy--in influencing the behavior of business fixed investment during the economic expansion that began in late 1982.

Date: 1989
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