Type

Working Paper

Authors

Karl Whelan

Subjects

Economics

Topics
supply material e22 h20 tax incentives industrial equipment capital investments tax reform

Tax incentives, material inputs, and the supply curve for capital equipment (1999)

Abstract The slope of the supply curve for capital equipment has important implications for the macroeconomics of investment and the effects of tax reform on capital accumulation. Goolsbee (1998) has used changes in investment tax incentives to identify whether this supply curve is significantly upward-sloping and has concluded that it is. This paper shows that investment tax incentives are a poor instrument for identifying this supply curve because they are spuriously correlated with supply shocks for equipment producers. Once input costs for equipment producers are controlled for, there is no evidence of a relationship between tax incentives and equipment prices. In fact, the evidence favors the interpretation that the supply curve is flat.
Collections Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law
Ireland -> University College Dublin -> Economics Research Collection

Full list of authors on original publication

Karl Whelan

Experts in our system

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Karl Whelan
University College Dublin
Total Publications: 69