The distinction between production and purchases of investment goods is essential for quantifying the response to changes in investment tax incentives. If investment goods are tradeable, a large fraction of the demand from changes in tax subsidies will be met from abroad. This difference between...

Phased-in tax reductions are a common feature of tax legislation. This paper uses a dynamic general equilibrium model to quantify the effects of delaying tax cuts. According to the analysis of the model, the phased-in tax cuts of the 2001 tax law substantially reduced employment, output, and...

Investment decisions are inherently forward-looking. The payoff of acquiring capital goods, particularly long-lived capital goods, is governed almost exclusively by events in the far future. Because the timing of the investment itself does not affect future payoffs, there are strong incentives...

This paper uses a dynamic general equilibrium model to analyze and quantify the aggregate effects of the timing of tax rate changes enacted in 2001 (which called for successive rate reductions through 2006) and 2003 (which made immediate tax rate cuts scheduled for 2004 and 2006). The phased-in...

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...