James Cloyne , University of California Davis, NBER and CEPR Joseba Martinez , London Business School and CEPR Haroon Mumtaz , School of Economics and Finance, Queen Mary, University of London Paolo Surico , London Business School and CEPR
April 22, 2024
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Using a narrative identi cation of tax changes in the United States over the post-WWII period, we document that a temporary cut in corporate income tax rates leads to a long-lasting increase in innovation and productivity, whereas changes in personal income tax rates only have short-term e ects. We show that the results on corporate taxes are consistent with theories of endogenous growth that feature tax amortisation allowances on intellectual property purchases, as in the tax code of most countries in the world. In contrast, personal taxes work primarily through the response of labour supply, which is as transient as the tax change itself.
J.E.L classification codes: E23, E62, O32, O34, O38
Keywords:corporate taxes, narrative identi cation, TFP, R&D, technological adoption.