Working Paper: NBER ID: w1026
Authors: Alan J. Auerbach
Abstract: The cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system. The purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest, via the cost of capital,taking full account of important issues that arise independently from the question of taxation. Included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest, and a treatment of taxation and uncertainty.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Taxation (H20) | Incentive to Invest (G31) |
| Cost of Capital (G31) | Resource Allocation (D45) |
| Taxation (H20) | Cost of Capital (G31) |
| Income Tax (H26) | User Cost of Capital (G31) |
| User Cost of Capital (G31) | Capital Used in Production (D24) |
| Inflation (E31) | Cost of Capital (G31) |
| Taxation (H20) | Investment Decisions (G11) |
| Tax Treatment Differences (H24) | Investment Decisions (G11) |
| Tax-Induced Changes (H31) | Choice of Production Techniques (L23) |