Corporate Tax Stimulus and Investment in Colombia
AbstractThis paper uses a yearly dataset of plant-level investment in Colombian firms during the period 1997 to 2007 to assess the impact of a tax incentive for firms that invest in fixed assets implemented in 2004. A positive and statistically significant correlation is found between the boom observed in investment and the adoption of the tax policy. However, the correlation vanishes when year-specific effects are controlled for. This result is robust to changes in the empirical specification, changes in estimation techniques, the inclusion of additional controls, and changes in the data set, among other tests. Overall, it is concluded that the tax stimulus analyzed was ineffective in promoting investment in Colombia.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4664.
Date of creation: Apr 2010
Date of revision:
Taxes; Investment; Colombia;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-22 (All new papers)
- NEP-MAC-2010-05-22 (Macroeconomics)
- NEP-PUB-2010-05-22 (Public Finance)
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