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Business Tax Incentives and Investment

  • Thomas Karier

    (The Jerome Levy Economics Institute)

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    Economists of all stripes view a rise in investment spending as the cure for nearly any macroeconomic disorder. Given that only public investment is amenable to direct control, how is the "optimal" level of investment in a given economy ensured? One route is through public policies aimed at producing incentives for private sector investment. In this paper, Karier evaluates the efficacy of one such program, the investment tax credit (ITC), in stimulating private investment expenditures. (The credit was in place sporadically and in various forms between the years 1966 and 1987 and applied only to investment in machinery, equipment, and furniture.)

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    Paper provided by EconWPA in its series Macroeconomics with number 9907001.

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    Length: 40 pages
    Date of creation: 01 Jul 1999
    Date of revision:
    Handle: RePEc:wpa:wuwpma:9907001
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 40; figures: included
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    1. Laurence H. Meyer & Joel L. Prakken & Chris P. Varvares, 1993. "Policy Watch: Designing an Effective Investment Tax Credit," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 189-196, Spring.
    2. J. Bradford De Long & Lawrence H. Summers, . "Equipment Investment and Economic Growth," J. Bradford De Long's Working Papers _122, University of California at Berkeley, Economics Department.
    3. Peter K. Clark, 1993. "Tax Incentives and Equipment Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 317-347.
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