NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Recent U.S. Investment Behavior and the Tax Reform Act of 1986: A Disaggregate View

Alan J. Auerbach, Kevin Hassett

NBER Working Paper No. 3626 (Also Reprint No. r1730)
Issued in February 1991
NBER Program(s):   PE

The Tax Reform Act of 1986 was expected to cause an overall decline in business fixed investment and a shift in the composition of investment away from machinery and equipment, which previously had received an investment tax credit. Yet neither investment relative to GNP nor equipment investment relative to total investment declined during the period 1987-89. This paper's analysis of investment at the level of individual industries and assets helps reconcile the recent pattern of investment and the predicted effects of the Tax Reform Act. We find that the trend toward investment in equipment predated the Act, and that recent investment in equipment has fallen short of what would have been expected on the basis on nontax factors alone. Using a new technique to identify the impact of taxation on investment, we confirm the importance of tax policy using the cross-section pattern of equipment investment since 1986.

download in pdf format
   (338 K)

download in djvu format
   (219 K)

email paper

This paper is available as PDF (338 K) or DjVu (219 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3626

Published: Carnegie-Rochester Conference Series on Public Policy, Vol. 35, pp. 185-215 , (Autumn 1991).

Users who downloaded this paper also downloaded these:
Auerbach and Hassett w3619 Tax Policy and Business Fixed Investment in the United States
Hassett and Hubbard w5683 Tax Policy and Investment
House and Shapiro w12514 Temporary Investment Tax Incentives: Theory with Evidence from Bonus Depreciation
Arnott and Stiglitz w3642 Price Equilibrium, Efficiency, and Decentralizability in Insurance Markets
Calomiris and Hubbard w4288 Internal Finance and Investment: Evidence from the Undistributed Profits Tax of 1936-1937
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us