TY  - JOUR
AU  - Goolsbee,Austan
TI  - Investment Tax Incentives, Prices, and the Supply of Capital Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6192
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6192
L1  - http://www.nber.org/papers/w6192.pdf
N1  - Author contact info:
Austan Goolsbee
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-5869
Fax: 773/702-0458
E-Mail: goolsbee@chicagobooth.edu
AB  - Using data on the prices of capital goods, this paper shows that much of the benefit of" investment tax incentives does not go to investing firms but rather to capital suppliers through" higher prices.  The reduction in the cost of capital from a 10 percent investment tax credit" increases equipment prices 3.5-7.0 percent.  This lasts several years and is largest for assets with" large order backlogs, low import competition, or with a large fraction of buyers able to use" investment subsidies.  Capital goods workers' wages rise, too. Instrumental variables estimates" of the short-run supply elasticity are around 1 and can explain the traditionally small estimates of" investment demand elasticities.  In absolute value, the demand elasticity implied here exceeds 1."
ER  -