Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/36829 
Year of Publication: 
2010
Series/Report no.: 
IZA Discussion Papers No. 5007
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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.
Subjects: 
Economic growth
endogenous technical change
optimal growth policy
tax-transfer system
transitional dynamics
JEL: 
H20
O30
O40
Document Type: 
Working Paper

Files in This Item:
File
Size
392.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.