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Business Tax Incentives and Investment

Author

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  • Thomas Karier

    (The Jerome Levy Economics Institute)

Abstract

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.)

Suggested Citation

  • Thomas Karier, 1999. "Business Tax Incentives and Investment," Macroeconomics 9907001, EconWPA.
  • 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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    References listed on IDEAS

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    1. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    2. 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.
    3. 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.
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    JEL classification:

    • E - Macroeconomics and Monetary Economics

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