Tax Elasticity Estimates for Capital STocks in Canada

Jean-Francois Wen and Fatih Yilmaz

No 2018-01, Working Papers from Department of Economics, University of Calgary

Abstract: We use aggregate panel data for the Canadian provinces to estimate the long-run user cost elasticity (UCE) of capital. The estimates exploit three sources of variation in tax policy: across provinces, industries, and years. The UCE is estimated to be between −0.4 and −1.3 for machinery and equipment; estimates for non-residential construction are statistically not different from zero. We also provide semi-elasticitiesof capital with respect to marginal effective tax rates (METR).

Date: 2018-01-03
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Working Paper: Tax Elasticity Estimates for Capital Stocks in Canada (2020)
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