NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inflation, Tax Rules, and Investment: Some Econometric Evidence

Martin Feldstein

NBER Working Paper No. 577 (Also Reprint No. r0300)
Issued in August 1982
NBER Program(s):   PE

This paper presents econometric evidence on the effect of tax incentives on business Investment in the United States in the period from 1953 through1978. The analysis emphasizes that the Interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960's.Because the investment process is far too complex for any simple econometric model to be convincing, I have estimated three quite different models of investment behavior. The strength of the empirical evidence rests on the fact that all three specifications support the same conclusion. More generally, the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes, especially taxes on capital income. The failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories. This paper was presented as the Fisher-Shultz Lecture at the Fourth World Congress of the Econometric Society, 29 August 1980, in Aix-en-Province.

download in pdf format
   (868 K)

email paper

This paper is available as PDF (868 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published:

Users who downloaded this paper also downloaded these:
Summers w0604 Inflation, Taxation, and Corporate Investment: A q-Theory Approach
Feldstein The Costs and Benefits of Going from Low Inflation to Price Stability
Feldstein Inflation, Tax Rules, and Investment: Some Econometric Evidence
Feldstein Inflation, Income Taxes, and the Rate of Interest: A Theoretical Analysis
Pindyck and Solimano Economic Instability and Aggregate Investment
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us