In this paper, we summarize recent advances in the study of effects of tax policy on the fixed investment decisions of firms. We attempt to identify consensus where it has been achieved and to highlight important unresolved issues. In addition, we discuss the implications of recent findings for...

Recent research on business investment decisions suggests that real investment in plant and equipment is quite sensitive to changes in the user cost of capital, pointing to the possibility that long-run changes in tax policy may have a significant impact on an economy's capital stock. Indeed,...