The long-run investment effect of taxation in OECD countries

Jakob Madsen, Antonio Minniti and Francesco Venturini ()

No 527, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: The gradually changing nature of production and the move away from tangible investment towards intangible investment over the past century suggests that the effects of the tax structure on investment need to be reassessed. To address this issue, we establish an endogenous growth model in which investment in tangible assets, R&D and education are influenced by different types of taxes. We test the long-run implications of the model using annual data for 21 OECD countries over the period 1890-2015. We find that corporate taxes reduce investment in tangible assets and R&D. However, while personal income taxes reduce investment in tertiary education, they enhance the investment in R&D. Thus, a revenue-neutral switch from corporate to personal income taxes is growth enhancing.

Keywords: taxation; innovation; Tangible and Intangible Capital; economic growth (search for similar items in EconPapers)
JEL-codes: E10 E62 O38 O40 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-acc, nep-cwa, nep-gro, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: The long‐run investment effect of taxation in OECD countries (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:527

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