U.S. Investment Since the Tax Cuts and Jobs Act of 2017

Kopp, Emanuel; Leigh, Daniel; Mursula, Susanna; Tambunlertchai, Suchanan

doi:10.5089/9781498317047.001

Cited by 26 publications

(28 citation statements)

References 15 publications

(20 reference statements)

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“… See, for example, Basu, ; Kopp, Leigh, Mursula, & Tambunlertchai, . This value of σ = 2.66 implies a markup of around 60%, which is consistent with recent evidence from Kopp et al.…”

supporting

confidence: 85%

International effects of corporate tax cuts on income distribution

Bawa

2020

Rev International Economics

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In late December 2017, the United States slashed its corporate income tax rate (CIT) and became the latest example of a downward trend across OECD countries since the early 1980s (see Figure 1). 1 The passage of this CIT cut has rekindled the debate over who stands to benefit from it and whether such a type of tax cuts exacerbates income inequality. 2 While a large body of literature has focused on the burden of CIT on factors of production (i.e., capital and labor), studies that assess the cross-border impacts of national CIT cuts on income inequality have been few and far between. 3 This paper contributes to such a debate by presenting a multi-country DSGE model with heterogeneous agents to explore the effects of a unilateral CIT cut on domestic income inequality and, the often overlooked, international spillover effects. In particular, the model provides a mechanism by which a CIT cut increases income inequality, domestically and internationally, and examines how such increases are driven over the short and long runs. Our model consists of "capitalist" households, who own capital, and "worker" households whose income consists exclusively of labor income. Our model

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“… See, for example, Basu, ; Kopp, Leigh, Mursula, & Tambunlertchai, . This value of σ = 2.66 implies a markup of around 60%, which is consistent with recent evidence from Kopp et al.…”

supporting

confidence: 85%

International effects of corporate tax cuts on income distribution

Bawa

2020

Rev International Economics

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“…This article is also related to the literature on how policy uncertainty and market concentration influence the investment responses to taxes. Recent literature has shown that increased economic policy uncertainty and greater corporate market power have played a role in subduing private investment (see, for example, Baker et al, 2016;Kopp et al, 2019). I conduct heterogeneity analyses that examine the impacts of policy uncertainty and competition on firms' response.…”

Section: Introductionmentioning

confidence: 99%

Tax rate cut and firm investment: evidence from Thailand

Muthitacharoen

2020

Applied Economics Letters

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How do firms' investment respond to a large corporate tax rate cut in developing countries? This study uses a matched difference-indifference approach to estimate the investment responses of Thailand's 2012-13 corporate income tax cut. It finds that the tax cut has significantly boosted investment. The findings also underline the heterogeneity of the investment responses between local and foreign firms as well as the potential roles of policy uncertainty and market competition on investment response.

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“…If we next define as the investment-GDP ratio, then it follows that A higher investment-to-GDP ratio leads to faster capital stock growth -at constant capacity utilization. Since empirically investment is usually completely dominated by 'accelerator effects' operating through aggregate demand (Kopp et al 2019), it follows from (14) and (15) that a structural decline in demand growth depresses TFP growth -through stagnating business investment, a decline in capital deepening and/or declining capacity utilization. As a result, the growth rate of potential output must be low -this causal chain is illustrated in Figure 2.…”

Section: Bringing Demand In From the Coldmentioning

confidence: 99%

The Secular Stagnation of Productivity Growth

Storm

2019

INET Working Paper Series

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The concern that an economy could experience persistent stagnation, caused by a structural weakness of aggregate demand, goes back to Alvin Hansen's (1939) thesis of 'secular stagnation'. Hansen's thesis has been revived in recent times, when it became clear that productivity and potential growth in the OECD countries have been declining for decades. However, in line with deep-rooted theoretical beliefs, that inadequate demand can only affect growth in the short run, secular stagnation (of potential growth) is treated as an exclusively supply-side problem, the root of which is a worrying steady decline in productivity growth. This paper argues that it is a mistake to dismiss secular demand stagnation as main cause of declining potential growth in the OECD. We argue that the theoretical case for demand-caused secular stagnation is strong and empirical evidence that it has affected the U.S. economy after the mid-1970s is entirely convincing. Demand is leading supply, also in the long run. Hansen had it right, after all. JEL Codes: E02; E12; E31; F02; F15.

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U.S. Investment Since the Tax Cuts and Jobs Act of 2017

Cited by 26 publications

References 15 publications

International effects of corporate tax cuts on income distribution

International effects of corporate tax cuts on income distribution

Tax rate cut and firm investment: evidence from Thailand

The Secular Stagnation of Productivity Growth

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