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Tax Reforms and Investment: A Cross-Country Comparison

  • Jason G. Cummins
  • Kevin A. Hassett
  • R. Glenn Hubbard

We use firm-level panel data to explore the extent to which fixed investment responds to tax reforms in 14 OECD countries. Previous studies have often found that investment does not respond to changes in the marginal cost of investment. We identify some of the factors responsible for this finding and employ an estimation procedure that sidesteps the most important of them. In so doing, we find evidence of statistically and economically significant investment responses to tax changes in 12 of the 14 countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5232.

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Date of creation: Aug 1995
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Publication status: published as Journal of Public Economics, vol. 62, no. 1-2, pp. 237-273, (1996).
Handle: RePEc:nbr:nberwo:5232
Note: CF PE
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  16. Auerbach, Alan J. & Hassett, Kevin, 1991. "Recent U.S. investment behavior and the tax reform act of 1986: A disaggregate view," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 185-215, January.
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  26. Jason Cummins & Trevor Harris & Kevin Hassett, 1995. "Accounting Standards, Information Flow, and Firm Investment Behavior," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 181-224 National Bureau of Economic Research, Inc.
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