Do balanced-budget fiscal stimuli of investment increase its economic value?
| Autor: | Roberto Tamborini, Michele Moretto, Cesare Dosi |
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| Rok vydání: | 2021 |
| Předmět: | |
| Zdroj: | German Economic Review. 23:157-179 |
| ISSN: | 1468-0475 1465-6485 |
| DOI: | 10.1515/ger-2020-0059 |
| Popis: | We examine the timing of a business investment providing valuable external benefits to society. A surge in uncertainty about private returns, a typical feature if not a cause of recessions, delays capital outlays to an extent that may be detrimental to social welfare. Is there an efficiency-improving public policy directed at accelerating investment? By real option analysis, we try answering this question by comparing three fiscal policies: (i) a simple subsidy on investment, (ii) a balanced-budget fiscal stimulus where the subsidy is subsequently covered by profit taxation, and (iii) by taxing external benefits as well. We show that, under a balanced-budget stimulus, investment acceleration may come at the expense of a net economic loss, and the higher is uncertainty on private returns, the higher the likehood of a negative outcome. However, this risk strongly declines when government spending is balanced by taxing both private and public returns on investment. |
| Databáze: | OpenAIRE |
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