Investment Tax Credit in an Open Economy

Partha Sen and Stephen J Turnovsky

No 3298, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper contrasts the effects of a permanent and temporary investment tax credit in an open economy. In both cases an ITC will initially stimulate investment, while reducing employment and output, and generating a current account deficit. If the ITC is permanent, the accumulation of capital leads to a higher equilibrium capital stock, higher employment and output, and a reduction in the economy's stock of net credit. If the ITC is temporary, after its removal, the economy eventually moves to a new steady-state equilibrium having a lower permanent capital stock and employment, together with a higher stock of net credit.

Date: 1990-03
Note: ITI IFM
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Published as Journal of Public Economics, Vol. 42, No. 3, pp. 277-299, (August 1990).

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Related works:
Journal Article: Investment tax credit in an open economy (1990)
Working Paper: INVESTMENT TAX CREDIT IN AN OPEN ECONOMY (1990)
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