Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25829
Authors: 
Panteghini, Paolo M.
Year of Publication: 
2006
Series/Report no.: 
CESifo working paper 1784
Abstract: 
The evidence shows that in most countries the present value of depreciation allowances is less than 100% of the cost of capital. In this article we use a real-option model with debt financing, and show that less favorable depreciation allowances are offset by tax benefits arising from debt financing. Allowing partial deduction of capital cost is thus a necessary condition for investment neutrality to hold.
JEL: 
D92
G33
Document Type: 
Working Paper

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