NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxation and Corporate Investment: The Impact of the 1991 Swedish Tax Reform

Alan J. Auerbach, Kevin Hassett, Jan Sodersten

NBER Working Paper No. 5189 (Also Reprint No. r2086)
Issued in July 1995
NBER Program(s):   PE

In 1990, the government of Sweden introduced a major tax reform to take effect in 1991. The Swedish system prior to the legislation was so complex that the size and magnitude of the likely effects of the reform on incentives to invest were unknown. In this paper, we draw on Södersten (1989) and Auerbach and Hassett (1992) and derive an expression for the user cost of capital that captures the essential features of the Swedish tax code both before and after the reform. We estimate the model for investment in equipment and find that the responsiveness of Swedish firms to the user cost is quite similar to that found for the U.S. Finally, we employ our model and estimates to assess the effects of the 1991 reform. We find that the impact of the reform on investment is likely to have been minor and had little to do with the contemporaneous sharp drop in investment.

download in pdf format
   (384 K)

email paper

This paper is available as PDF (384 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5189

Published: Swedish Economic Policy Review, vol. 2, no. 2, pp. 361-383, Autumn 1995.

Users who downloaded this paper also downloaded these:
Norrman and McLure Tax Policy in Sweden
Cummins, Hassett, and Hubbard w5232 Tax Reforms and Investment: A Cross-Country Comparison
Davis and Henrekson w12768 Economic Performance and Work Activity in Sweden after the Crisis of the Early 1990s
Hassett and Hubbard w5683 Tax Policy and Investment
Ben-David and Loewy w6095 Free Trade, Growth, and Convergence
 
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