Tax Incentives and Economic Growth

By Barry P. Bosworth | Go to book overview

he found that between 30 and 60 percent of the change in domestic investment was reflected in compensatory changes in the current- account balance.

Second, von Furstenberg constructed a small model for the United States of the basic income flows involved in the saving-investment relationship.50 He concluded that domestic factors relating to saving and investment explain as much as 80 percent of the variation in the net foreign investment balance. His study implies that a major effect of a policy-induced increase in the national saving rate would be to shift the foreign account toward a surplus.

The Sachs and von Furstenberg studies suggest that the international aspects cannot be ignored in the discussion of alternative measures to expand capital formation. While many investigators would agree with the Feldstein-Horioka view that there are significant barriers to the free movement of capital among countries in the short run, it is in the short run that the Keynesian income effects are most important. In the long run the income effects may be of less concern, but it is more difficult to argue that capital will not flow to the country where the returns are greatest.51 It seems unreasonable to combine for analytical purposes a long-run model of flexible prices and full employment with a short-run assumption that capital will not move among nations to equalize rates of return. It is more reasonable to take the view that incentives to expand saving must be matched by concurrent actions on the investment side if there is to be an effective increase in domestic capital formation.


Summary

Economists have achieved a greater consensus about the effect of interest rates and tax policy on investment than about their effect on private saving. In part, this is because there is less uncertainty from a

____________________
50
George M. von Furstenberg, "Domestic Determinants of Net U.S. Foreign Investment," International Monetary Fund Staff Papers, vol. 27 ( December 1980), pp. 637-78.
51
It must also be admitted that the full range of response of the foreign account is not easily predicted. A rise in national saving may initially lead to an outflow of capital, but if the resulting rise in the demand for foreign currencies leads to a fall in the nation's exchange rate, there will be an improvement in the expected rate of return on domestic investment because of the decline in the relative cost of domestic labor and materials.

-127-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Tax Incentives and Economic Growth
Table of contents

Table of contents

  • Title Page iii
  • Foreword vii
  • Contents ix
  • Chapter One - the Supply-Side Debate 1
  • Chapter Two - the Role of Capital Formation 23
  • Summary 55
  • Chapter Three - Saving and Private Capital Formation 59
  • Summary 94
  • Chapter Four - Investment Demand and Its Relation to Saving 97
  • Summary 127
  • Chapter Five - Labor Supply 130
  • Summary 172
  • Chapter Six - Implications for Economic Policy 177
  • Index 205
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 212

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.