Short-Term Tax Cuts, Long-Term Stimulus / James Cloyne, Joseba Martinez, Haroon Mumtaz, Paolo Surico.

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Cloyne, James

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30246.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study the persistent effects of temporary changes in U.S. federal corporate and personal income tax rates using a narrative identification approach. A corporate income tax cut leads to a sustained increase in GDP and productivity, with peak effects between five and eight years. R&D spending and capital investment display hump-shaped responses while hours worked and employment are much less affected. In contrast, personal income tax cuts trigger a short-lived boost to GDP, productivity and hours worked but have no long-term effects. We develop and estimate an endogenous growth model with variable factor utilization and show that these features generate a pro-cyclical response of productivity which is key to account for our empirical findings.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30246 (Browse shelf(Opens below))	Not For Loan

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July 2022.

We study the persistent effects of temporary changes in U.S. federal corporate and personal income tax rates using a narrative identification approach. A corporate income tax cut leads to a sustained increase in GDP and productivity, with peak effects between five and eight years. R&D spending and capital investment display hump-shaped responses while hours worked and employment are much less affected. In contrast, personal income tax cuts trigger a short-lived boost to GDP, productivity and hours worked but have no long-term effects. We develop and estimate an endogenous growth model with variable factor utilization and show that these features generate a pro-cyclical response of productivity which is key to account for our empirical findings.