Quantifying optimal growth policy

Arbeitspapier

The optimal mix of growth policies is determined within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and accounts for 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3092

Classification and Topics

• Classification: Wirtschaft ; Taxation, Subsidies, and Revenue: General ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General ; Economic Growth and Aggregate Productivity: General
• Subject: economic growth, endogenous technical change ; optimal growth policy ; tax-transfer system ; transitional dynamics ; Wachstumspolitik ; Investitionspolitik ; Forschungssubvention ; Steuerbegünstigung ; Körperschaftsteuer ; Steuerwirkung ; Optimales Wachstum ; Endogener technischer Fortschritt ; Theorie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grossmann, Volker ; Steger, Thomas M. ; Trimborn, Timo
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38919
• Last update: 10.03.2025, 11:43 AM CET