Taxation and Corporate Investment: The Impact of the 1991 Swedish Tax Reform
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.
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|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.|
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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- repec:bof:bofrdp:1994_008 is not listed on IDEAS
- Bergstrom, Villy & Sodersten, Jan, 1984. " Do Tax Allowances Stimulate Investment?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 86(2), pages 244-68.
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" The Investment Funds System Reconsidered,"
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"Tax Reform and Adjustment Costs: The Impact on Investment and Market Value,"
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2103, National Bureau of Economic Research, Inc.
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- Dufwenberg, Martin & Koskenkyla, Heikki & Sodersten, Jan, 1994. " Manufacturing Investment and Taxation in the Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 443-61.
- Auerbach, Alan J. & Hassett, Kevin, 1992.
"Tax policy and business fixed investment in the United States,"
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Elsevier, vol. 47(2), pages 141-170, March.
- Alan J. Auerbach & Kevin Hassett, 1991. "Tax Policy and Business Fixed Investment in the United States," NBER Working Papers 3619, National Bureau of Economic Research, Inc.
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