Taxation and Corporate Investment: The Impact of the 1991 Swedish Tax Reform

Alan Auerbach, Kevin Hassett and Jan Södersten ()

No 5189, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 1990, the government of Sweden introduced a major tax reform to take effect in 1991. The Swedish system prior to the legislation was so complex that the size and magnitude of the likely effects of the reform on incentives to invest were unknown. In this paper, we draw on Södersten (1989) and Auerbach and Hassett (1992) and derive an expression for the user cost of capital that captures the essential features of the Swedish tax code both before and after the reform. We estimate the model for investment in equipment and find that the responsiveness of Swedish firms to the user cost is quite similar to that found for the U.S. Finally, we employ our model and estimates to assess the effects of the 1991 reform. We find that the impact of the reform on investment is likely to have been minor and had little to do with the contemporaneous sharp drop in investment.

JEL-codes: E62 H32 (search for similar items in EconPapers)
Date: 1995-07
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Swedish Economic Policy Review, vol. 2, no. 2, pp. 361-383, Autumn 1995.

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Working Paper: Taxation and Corporate Investment: The Impact of the 1991 Swedish Tax Reform (1995)
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