TY  - JOUR
AU  - Goulder,Lawrence H.
AU  - Summers,Lawrence H.
TI  - Tax Policy, Asset Prices, and Growth:  A General Equilibrium Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2128
PY  - 1987
Y2  - 1987
UR  - http://www.nber.org/papers/w2128
L1  - http://www.nber.org/papers/w2128.pdf
N1  - Author contact info:
Lawrence H. Goulder
Department of Economics
Landau Economics Building 328
Stanford University
Stanford, CA  94305
Tel: 650/723-3706
Fax: 650/725-5702
E-Mail: goulder@stanford.edu

Lawrence H. Summers
Harvard Kennedy School of Government
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-9322
Fax: 617/495-0436
E-Mail: lhs@harvard.edu
AB  - This paper presents a multisector general equilibrium model that is capable of providing integrated assessments of the economy's short- and long- run responses to tax policy changes. The model contains an explicit treatment of firm's investment decisions according to which producers exhibit forward- looking behavior and take account of adjustment costs inherent in the installation of new capital. This permits an examination of both short-run effects of tax policy on industry profits and asset prices as well as 1ong-term effects on capital accumulation. The model contains considerable detail on U.S. industry, corporate financial policies, and the U.S. tax system. Simulation results reveal that the effects of tax policy differ significantly depending on whether the policy is oriented toward new or old capital measures like the investment tax credit stimulate investment without conferring significant windfall gains on corporate shareholders. Corporate tax rate reductions with the same revenue cost, on the other hand, yield large windfalls to shareholders while providing only a modest stimulus to investment in plant and equipment.
ER  -