IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The cost of capital and investment in developing countries

Listed author(s):
  • Auerbach, Alan

The author's model can be used to evaluate how current and new policies affect incentives to invest in a developing country. The model takes into account factors that are often ignored in analyses of investment in more developed countries; such as risk, foreign tax provisions that affect capital flows, trade distortions, lack of domestic capital markets, and the relative credibility of government policy changes. The author reviews the literature on investment and capital costs, showing that the effects of tax and nontax government policies should be incorporated in any analysis of investment behavior. The following questions have been focused on : 1) for each dollar of forgone tax revenues, how much have tax incentives stimulated investment?; 2) do taxes affect foreign investment?; 3) how do taxes affect industrial production?; 4) how have tax instruments affected the use of labor?; 5) how have business taxes and tax expenditures affected technological change?; and 6) are these tax induced distortions preventing firms from holding optimal levels of fixed factors?

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 410.

in new window

Date of creation: 30 Apr 1990
Handle: RePEc:wbk:wbrwps:410
Contact details of provider: Postal:
1818 H Street, N.W., Washington, DC 20433

Phone: (202) 477-1234
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:410. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.