EconPapers    
Economics at your fingertips  
 

Quantifying Optimal Growth Policy

Volker Grossmann (), Thomas Steger () and Timo Trimborn ()

No 5007, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The optimal mix of growth policies is derived within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and takes into account transitional dynamics. Currently, for calculating corporate taxable income US firms are allowed to deduct approximately all of their capital and R&D costs from sales revenue. Our analysis suggests that this policy leads to severe underinvestment in both R&D and physical capital. We find that firms should be allowed to deduct between 2-2.5 times their R&D costs and about 1.5-1.7 times their capital costs. Implementing the optimal policy mix is likely to entail huge welfare gains.

Keywords: economic growth; tax-transfer system; transitional dynamics; optimal growth policy; endogenous technical change (search for similar items in EconPapers)
JEL-codes: H20 O30 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-ino
Date: 2010-06
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Published in: Journal of Public Economic Theory, 2016, 18 (3), 451-485

Downloads: (external link)
http://ftp.iza.org/dp5007.pdf (application/pdf)

Related works:
Journal Article: Quantifying Optimal Growth Policy (2016) Downloads
Working Paper: Quantifying Optimal Growth Policy (2010) Downloads
Working Paper: Quantifying Optimal Growth Policy (2010) Downloads
Working Paper: Quantifying Optimal Growth Policy (2010) Downloads
Working Paper: Quantifying Optimal Growth Policy (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5007

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-10-20
Handle: RePEc:iza:izadps:dp5007