Abstract

http://ssrn.com/abstract=129571
 
 

References (41)



 
 

Citations (5)



 
 

Footnotes (10)



 


 



Taxes and the Quality of Capital


Austan Goolsbee


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

September 1998

NBER Working Paper No. w6731

Abstract:     
This paper shows that tax policy toward investment, by changing the relative prices of capital varieties, can have a direct effect on the quality of capital goods that firms purchase. The empirical results indicate that this impact is economically important and readily apparent in disaggregated data on farming, mining, and construction machinery. The paper also applies a general method for aggregation using index number theory which suggests that all of the investment increase generated by tax subsidies comes from buying higher quality capital goods as opposed to buying a larger number of capital goods. It shows, further, that the supply of capital is upward sloping with an elasticity of about one. The tax induced quality changes documented in the paper imply a tax distortion whose deadweight loss is neglected in the conventional literature but whose magnitude indicates may represent a substantial efficiency cost from capital taxation (or subsidy).

Number of Pages in PDF File: 34

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Date posted: October 9, 1998  

Suggested Citation

Goolsbee, Austan, Taxes and the Quality of Capital (September 1998). NBER Working Paper No. w6731. Available at SSRN: http://ssrn.com/abstract=129571

Contact Information

Austan Goolsbee (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  41
Citations:  5
Footnotes:  10

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