Inflation, Tax Rules and Investment: Some Econometric Evidence
AbstractThis paper presents econometric evidence on the effect of tax incentives on business Investment in the United States in the period from 1953 through1978. The analysis emphasizes that the Interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960's.Because the investment process is far too complex for any simple econometric model to be convincing, I have estimated three quite different models of investment behavior. The strength of the empirical evidence rests on the fact that all three specifications support the same conclusion. More generally, the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes, especially taxes on capital income. The failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories. This paper was presented as the Fisher-Shultz Lecture at the Fourth World Congress of the Econometric Society, 29 August 1980, in Aix-en-Province.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 50 (1982)
Issue (Month): 4 (July)
Other versions of this item:
- Martin Feldstein, 1983. "Inflation, Tax Rules, and Investment: Some Econometric Evidence," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 243-286 National Bureau of Economic Research, Inc.
- Martin Feldstein, 1980. "Inflation, Tax Rules, and Investment: Some Econometric Evidence," NBER Working Papers 0577, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Feldstei & Jerry Green & Eytan Sheshinski, 1978.
"Inflation and Taxes in a Growing Economy with Debt and Equity Finance,"
in: Research in Taxation, pages 53-70
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- Martin Feldstein & Jerry Green & Eytan Sheshinski, 1983. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 44-60 National Bureau of Economic Research, Inc.
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