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Welfare effects of investment incentive policies: A quantitative assessment

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  • Fehr, Hans
Abstract
This paper deals with the intergenerational incidence of corporate tax policies in the overlapping generation model. Corportate tax reforms affect the welfare levels of individuals via three Channels: (i) changes in the net. tax burdens, (ii) changes in the factor prices, and (iii) changes in deadweight loss associated with the taxes. We develop formulas to isolate t.hese effects in a closed and a smal] open economy and then apply these formulas to a policy experiment, similar to a recent German corporate tax reform plan. The simulations suggest that generations' utility changes are mainly due to intergenerational income effects. While in closed economies changes in net tax burdens are most important especially in the short-run, the revaluation of the initial capital stock is an important redistribution Channel in the smail open economy.

Suggested Citation

  • Fehr, Hans, 1995. "Welfare effects of investment incentive policies: A quantitative assessment," Tübinger Diskussionsbeiträge 57, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:57
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    References listed on IDEAS

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    1. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Dynamic CGE modelling; Investment incentives; intergenerational tax incidence; equal yield tax reform;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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