Corporate Tax Stimulus and Investment in Colombia

Arturo Galindo and Marcela Meléndez

No 4664, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper uses a yearly dataset of plant-level investment in Colombian firms during the period 1997 to 2007 to assess the impact of a tax incentive for firms that invest in fixed assets implemented in 2004. A positive and statistically significant correlation is found between the boom observed in investment and the adoption of the tax policy. However, the correlation vanishes when year-specific effects are controlled for. This result is robust to changes in the empirical specification, changes in estimation techniques, the inclusion of additional controls, and changes in the data set, among other tests. Overall, it is concluded that the tax stimulus analyzed was ineffective in promoting investment in Colombia.

Keywords: Taxes; Investment; Colombia (search for similar items in EconPapers)
JEL-codes: E22 H2 O54 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-mac and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Corporate Tax Stimulus and Investment in Colombia (2010)
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