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Corporate tax reform and business investment: Empirical estimates for structures and equipment

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Abstract

New econometric investment equations, separating equipment from structures, are used to evaluate the impact of the 1986 tax reform law. The computations suggest that investment in equipment will be significantly reduced, largely as a consequence of the abolition of the investment tax credit. Despite longer tax lives, investment in structures may increase because of the reduction in corporate income tax rates.

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References

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Authors and Affiliations

  1. Widener University, 19013, Chester, PA, USA

    V. G. Duggal (Associate Professor of Economics)

  2. University of Pennsylvania, 3718 Locust Walk, 19104-GL97, Philadelphia, PA, USA

    F. G. Adams (Professor of Economics)

Authors
  1. V. G. Duggal
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  2. F. G. Adams
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Additional information

The underlying investment equations were estimated under a research contract with Wharton Econometrics. We are grateful to Kurt Karl for his help, advice and critique during every stage of this research. We are grateful to the Bureau of Industrial Economics (BIE) for the successful completion of the enormous task of separating the two types of spending at the 4-digit SIC code level.

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Duggal, V.G., Adams, F.G. Corporate tax reform and business investment: Empirical estimates for structures and equipment. Empirical Economics 12, 187–195 (1987). https://doi.org/10.1007/BF01973429

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  • DOI: https://doi.org/10.1007/BF01973429

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