The long-run investment eﬀect of taxation in OECD countries
The gradually changing nature of production and the move away from tangible investment towards intangible investment over the past century suggests that the eﬀects of the tax structure on investment need to be reassessed. To address this issue, we establish an endogenous growth model in which investment in tangible assets, R&D and education are inﬂuenced by diﬀerent types of taxes. We test the long-run implications of the model using annual data for 21 OECD countries over the period 1890-2015. We ﬁnd that corporate taxes reduce investment in tangible assets and R&D. However, while personal income taxes reduce investment in tertiary education, they enhance the investment in R&D. Thus, a revenue-neutral switch from corporate to personal income taxes is growth enhancing.