Natural-resource taxation and investment exhibit cycles in a vast number of countries, driving political turmoil and power shifts. Using a rational-expectations model, we show cycles result from governments' inability to commit to future taxes and firms' inability to credibly exit a country...

Many economists believe that the stock market plays an important role in efficiently allocating capital to its most productive uses. This standard story of the stock market was called into question by events in the late 1990s, when some observers believed that stock market overvaluation – or a...

The paper studies the interaction between cyclical uncertainty and investment in a stochastic real option framework where demand shifts stochastically between three different states, each with different rates of drift and volatility. In our setting the shifts are governed by a three-state Markov...

In this paper, we use an exogenous variation in tax regulations to analyze the impact of bonus depreciation programs on business investment. To promote economic convergence of Eastern and Western Germany after reunification, bonus depreciation tax incentives were granted for investments in...

This paper presents a dynamic model of risk-averse producers' decision to invest in physical capital and to export. The model features irreversible investment, no capital markets and fixed and sunk costs to export. Several features of the distribution of investment rates and export participation...

This paper explores cost-effective low-carbon R&D and capital investment portfolios for the electricity generation sector through 2060. We present a novel method for long-term planning by combining an economic model of endogenous non-linear technical change and a generation capacity planning...

We estimate the effect of electorally induced policy uncertainty on investment in the manufacturing sector. Because state governors exercise considerable influence over legislation and considerable discretion over regulation and permitting, and because the policies relevant to business...

This paper shows that taxes which are understood to be neutral with respect to the marginal investment decisions may be distortionary with respect to entrepreneurial decisions. In particular, we apply an intertemporal model to show that a comprehensive income tax is distortionary unless all...

We show how temporary ownership by private equity firms affects industry structure, competition and welfare. Temporary ownership leads to strong investment incentives because equilibrium resale prices are determined by buyers incentives to block rivals from obtaining assets. These incentives...

Does increased policy uncertainty dampen investment plans of firms? We provide direct evidence on this question by examining the effects of an unexpectedly accepted and farreaching referendum in Switzerland in February 2014. The vote has put several economically relevant agreements between...