Recent U.S. Investment Behavior and the Tax Reform Act of 1986: A Disaggregate View / Alan J. Auerbach, Kevin Hassett.

Format:

Book

Author/Creator:

Auerbach, Alan J.

Contributor:

National Bureau of Economic Research.

Hassett, Kevin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3626.

NBER working paper series no. w3626

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Recent U.S. Investment Behavior and the Tax Reform Act of 1986

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

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.

Notes:

Print version record

February 1991.