Recent research on business investment decisions suggests that real investment in plant and equipment is quite sensitive to changes in the user cost of capital, pointing to the possibility that long-run changes in tax policy may have a significant impact on an economy's capital stock. Indeed,...

In this paper, we summarize recent advances in the study of effects of tax policy on the fixed investment decisions of firms. We attempt to identify consensus where it has been achieved and to highlight important unresolved issues. In addition, we discuss the implications of recent findings for...

In the late 1970s, many economists argued that the deleterious effects of inflation on the user cost of capital for U.S. firms were large. Since that time, the tax code has changed, the level of inflation has dropped significantly, and the of investment has evolved considerably. In this paper,...