Dynamic effects of anticipated and temporary tax changes in a R&D-based growth model

Arbeitspapier

Tax changes are often announced before their implementation and are not permanent, but rather only temporary. Accordingly, R&D firms will optimally adjust their investment decisions to fit tax schedule changes. This study analyzes how changes in various tax rates relevant to corporate activities affect growth and welfare, considering their methods of implementation. For this purpose, we consider adjustment costs involved in the investment process and allow firms to make a forward looking investment decision in a R&D-based endogenous growth model. Calibrating the model with U.S. data, we find that a dividend tax cut reduces the level of welfare irrespective of implementation method. On the other hand, a capital gains tax cut and a rise in the R&D tax credit rate enhance the level of welfare irrespective of implementation. However, the announcement of these tax changes prior to implementation reduces their effectiveness.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 913

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Management of Technological Innovation and R&D ; One, Two, and Multisector Growth Models
• Subject: Fiscal policy ; R&D ; Economic growth

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Takao, Kizuku
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/127081
• Last update: 10.03.2025, 11:42 AM CET