Short-Term Tax Cuts, Long-Term Stimulus / James Cloyne, Joseba Martinez, Haroon Mumtaz, Paolo Surico.

Format:

Book

Author/Creator:

Cloyne, James.

Contributor:

National Bureau of Economic Research.

Martinez, Joseba.

Mumtaz, Haroon.

Surico, Paolo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30246.

NBER working paper series no. w30246

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We study the persistent effects of temporary changes in U.S. federal corporate and personal income tax rates using a narrative identification approach. A corporate income tax cut leads to a sustained increase in GDP and productivity, with peak effects between five and eight years. R&D spending and capital investment display hump-shaped responses while hours worked and employment are much less affected. In contrast, personal income tax cuts trigger a short-lived boost to GDP, productivity and hours worked but have no long-term effects. We develop and estimate an endogenous growth model with variable factor utilization and show that these features generate a pro-cyclical response of productivity which is key to account for our empirical findings.

Notes:

Print version record

July 2022.