Quantifying optimal growth policy

1. Person: Grossmann, Volker
Weitere Personen: Steger, Thomas M.; Trimborn, Timo
Format: Online-Artikel
Sprache: English
Veröffentlicht: Institute for the Study of Labor (IZA) 2010
Serien: Diskussionsbeitrag
Schlagworte: Wachstumspolitik
Optimales Wachstum
Endogener technischer Fortschritt
Growth policy
Investment policy
Research funding
Tax effects
Optimal growth
Endogenous growth model
United States
Online Zugang: https://www.econstor.eu/bitstream/10419/38919/1/630130604.pdf
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Details: The optimal mix of growth policies is derived within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and takes into account transitional dynamics. Currently, for calculating corporate taxable income US firms are allowed to deduct approximately all of their capital and R&D costs from sales revenue. Our analysis suggests that this policy leads to severe underinvestment in both R&D and physical capital. We find that firms should be allowed to deduct between 2-2.5 times their R&D costs and about 1.5-1.7 times their capital costs. Implementing the optimal policy mix is likely to entail huge welfare gains.

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