%0 Report
        %A Grossmann, Volker
%A Steger, Thomas M.
%A Trimborn, Timo
        %T Quantifying Optimal Growth Policy
        %D 2010
        %8 2010 Jun
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 5007
        %U https://www.iza.org/publications/dp5007
        %X 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.
        %K economic growth
%K tax-transfer system
%K transitional dynamics
%K optimal growth policy
%K endogenous technical change