Home > Publications . Search All . Browse All . Country . Browse PSC Pubs . PSC Report Series

PSC In The News

RSS Feed icon

Smock says cohabitation does not reduce odds of marriage

Smock cited in story on how low marriage rates may exacerbate marriage-status economic inequality

Shapiro says Americans' seemingly volatile spending pattern linked to 'sensible cash management'

Highlights

Susan Murphy named Distinguished University Professor

Sarah Burgard and former PSC trainee Jennifer Ailshire win ASA award for paper

James Jackson to be appointed to NSF's National Science Board

ISR's program in Society, Population, and Environment (SPE) focuses on social change and social issues worldwide.

Next Brown Bag


PSC Brown Bags will return in the fall

Temporary investment tax incentives: Theory with evidence from bonus depreciation

Publication Abstract

House, C.L., and Matthew D. Shapiro. 2008. "Temporary investment tax incentives: Theory with evidence from bonus depreciation." American Economic Review, 98(3): 737-768.

The intertemporal elasticity of investment for long-lived capital goods is nearly infinite. Consequently, investment prices should fully reflect temporary tax subsidies, regardless of the investment supply elasticity. Since prices move one for-one with the subsidy, elasticities can be inferred from quantities alone. This paper uses a recent tax policy-bonus depreciation-to estimate the investment supply elasticity. Investment in qualified capital increased sharply. The estimated elasticity is high-between 6 and 14. There is no evidence that market prices reacted to the subsidy, suggesting that adjustment costs are internal, or that measurement error masks the price changes.

DOI:10.1257/aer.98.3.737 (Full Text)

Browse | Search : All Pubs | Next