@TechReport{iza:izadps:dp5007,
            	author={Grossmann, Volker and Steger, Thomas M. and Trimborn, Timo},
            	title={Quantifying Optimal Growth Policy},
            	year={2010},
	month={Jun},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={5007},
            	url={https://www.iza.org/publications/dp5007},
	abstract={The optimal mix of growth policies is derived within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and takes into account transitional dynamics. Currently, for calculating corporate taxable income US firms are allowed to deduct approximately all of their capital and R&D costs from sales revenue. Our analysis suggests that this policy leads to severe underinvestment in both R&D and physical capital. We find that firms should be allowed to deduct between 2-2.5 times their R&D costs and about 1.5-1.7 times their capital costs. Implementing the optimal policy mix is likely to entail huge welfare gains.},
	keywords={economic growth;tax-transfer system;transitional dynamics;optimal growth policy;endogenous technical change},
            }