New activities, the welfare cost of uncertainty and investment policies:
This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the cap...
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
1996
|
| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
5825 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the capital good. Agents are disappointment averse, putting greater utility weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that investment, labor and capitalists' income drop at a rate proportional to the standard deviation of the tax rate. Hence, policy uncertainty induces first-order adverse effects, whereas policy uncertainty leads to second-order effects when consumers maximize the conventional expected utility. The adverse effects of policy uncertainty can be partially overcome by a proper investment policy. The paper interprets the tax concessions granted to multinationals as a commitment device that helps overcoming the adverse implications of policy uncertainty. |
| Beschreibung: | 32 S. graph. Darst. |
Internformat
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| 520 | |a This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the capital good. Agents are disappointment averse, putting greater utility weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that investment, labor and capitalists' income drop at a rate proportional to the standard deviation of the tax rate. Hence, policy uncertainty induces first-order adverse effects, whereas policy uncertainty leads to second-order effects when consumers maximize the conventional expected utility. The adverse effects of policy uncertainty can be partially overcome by a proper investment policy. The paper interprets the tax concessions granted to multinationals as a commitment device that helps overcoming the adverse implications of policy uncertainty. | ||
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| 650 | 4 | |a Investments |x Effect of uncertainty on |x Econometric models | |
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| id | DE-604.BV011396477 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:09:03Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007661180 |
| oclc_num | 36075117 |
| open_access_boolean | 1 |
| owner | DE-19 DE-BY-UBM DE-521 |
| owner_facet | DE-19 DE-BY-UBM DE-521 |
| physical | 32 S. graph. Darst. |
| publishDate | 1996 |
| publishDateSearch | 1996 |
| publishDateSort | 1996 |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Aizenman, Joshua 1949- Verfasser (DE-588)124080057 aut New activities, the welfare cost of uncertainty and investment policies Joshua Aizenman Cambridge, Mass. 1996 32 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5825 This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an economy, where productivity of labor increases with the number of capital goods. Adding a new capital good requires a capital specific set-up cost, invested prior to using the capital good. Agents are disappointment averse, putting greater utility weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that investment, labor and capitalists' income drop at a rate proportional to the standard deviation of the tax rate. Hence, policy uncertainty induces first-order adverse effects, whereas policy uncertainty leads to second-order effects when consumers maximize the conventional expected utility. The adverse effects of policy uncertainty can be partially overcome by a proper investment policy. The paper interprets the tax concessions granted to multinationals as a commitment device that helps overcoming the adverse implications of policy uncertainty. Ökonometrisches Modell Capital levy Econometric models Investments Effect of uncertainty on Econometric models Uncertainty Econometric models Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5825 (DE-604)BV002801238 5825 http://papers.nber.org/papers/w5825.pdf kostenfrei Volltext |
| spellingShingle | Aizenman, Joshua 1949- New activities, the welfare cost of uncertainty and investment policies National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Ökonometrisches Modell Capital levy Econometric models Investments Effect of uncertainty on Econometric models Uncertainty Econometric models |
| title | New activities, the welfare cost of uncertainty and investment policies |
| title_auth | New activities, the welfare cost of uncertainty and investment policies |
| title_exact_search | New activities, the welfare cost of uncertainty and investment policies |
| title_full | New activities, the welfare cost of uncertainty and investment policies Joshua Aizenman |
| title_fullStr | New activities, the welfare cost of uncertainty and investment policies Joshua Aizenman |
| title_full_unstemmed | New activities, the welfare cost of uncertainty and investment policies Joshua Aizenman |
| title_short | New activities, the welfare cost of uncertainty and investment policies |
| title_sort | new activities the welfare cost of uncertainty and investment policies |
| topic | Ökonometrisches Modell Capital levy Econometric models Investments Effect of uncertainty on Econometric models Uncertainty Econometric models |
| topic_facet | Ökonometrisches Modell Capital levy Econometric models Investments Effect of uncertainty on Econometric models Uncertainty Econometric models |
| url | http://papers.nber.org/papers/w5825.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT aizenmanjoshua newactivitiesthewelfarecostofuncertaintyandinvestmentpolicies |