The evidence shows that in most countries the present value of depreciation allowances is less than 100% of the cost of capital. In this article we use a real-option model with debt financing, and show that less favorable depreciation allowances are offset by tax benefits arising from debt...

The apparent slowdown in U.S. investment and productivity growth in recent years has led to a number of proposals to stimulate investment through the adoption of tax incentives. This paper describes the incentives that were contained in the February 1993 Budget and estimates their effect on the...