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

International Monetary Fund

No 1988/034, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the behavior of business fixed investment in the United States in the 1980s. 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.

Keywords: WP; Business fixed; investment; investment tax credit; business investment; investment efficiency effect; fixed investment; cost of funds; investment growth; replacement investment; fourth quarter; Private investment; Depreciation; Capital gains tax; Tax incentives; Tax allowances (search for similar items in EconPapers)
Pages: 42
Date: 1988-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1988/034

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