Tax Incentives, Material Inputs, and the Supply Curve for Capital Equipment

摘要

The slope of the supply curve for capital equipment has important implications211u001efor theects of tax reform on capital accumulation. Goolsbee (1998) has used 211u001echanges in investment tax incentives to identify whether this supply curve is 211u001esignicantly upward-sloping and has concluded that it is. This paper shows that 211u001einvestment tax incentives are a poor instrument for identifying this supply curve 211u001ebecause they are spuriously correlated with supply shocks for equipment 211u001eproducers. Once input costs for equipment producers are controlled for, there is 211u001eno evidence of a relationship between tax incentives and equipment prices. In 211u001efact, the evidence favors a at supply curve interpretation.