Luca Di Corato ()
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Luca Di Corato: Department of Economics, Swedish University of Agricultural Sciences, Postal: Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden
Abstract: This paper examines the net benefit accruing to a present-biased government contemplating the option of speeding up investment using a tax cut or an investment subsidy as an incentive. The literature generally suggests the use of an investment subsidy rather than a tax cut. However, this study shows that, depending on the degree of present-biasedness, it may be more advantageous for the government to provide a tax cut.
Keywords: Investment; Tax reduction; Investment subsidy; Quasi-hyperbolic discounting; Real options
7 pages, March 13, 2014
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Investment_stimuli_DiCorato.pdf
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