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| Title: | | Quantifying Optimal Growth Policy  |
| Authors: | | Grossmann, Volker Steger, Thomas M. Trimborn, Timo |
| Issue Date: | | 2010 |
| Series/Report no.: | | Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Technology and Growth B1-V3 |
| Abstract: | | This paper develops a comprehensive endogenous growth framework to derive the optimal growth policy. The analysis is novel in that we capture important elements of the tax-transfer system and fully take into account transitional dynamics in our numerical analysis. US firms can currently about fully deduct their R&D and capital costs for calculating taxable corporate income. Our analysis suggests that the status quo 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 from sales revenue. 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: | | O30 H20 O40 |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Jahrestagung des Vereins für Socialpolitik 2010 (Kiel): Ökonomie der Familie
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