A Study of the Association of the Investment Tax Credit With Investment Spending
Maloney, David Mitchell
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https://hdl.handle.net/2142/71377
Description
Title
A Study of the Association of the Investment Tax Credit With Investment Spending
Author(s)
Maloney, David Mitchell
Issue Date
1984
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
The purpose of this dissertation is to examine the association that existed between the investment tax credit and investment activity during two periods: the period surrounding the date when the credit was originally enacted and the period surrounding the date when the credit was increased from seven percent to ten percent. From this examination, a statement is made as to whether the credit has contributed to an increased level of investment spending.
This study is different from other earlier efforts of similar purpose because of the methodological approach that is taken. Rather than choosing only one specific structural econometric investment model for hypothesis testing purposes, various elements are distilled from several investment models for use in this study. The elements, which are economic factors that are considered important to investment activity, are then utilized in a two step process. In the first step, a regression analysis is conducted in order to isolate the level of investment activity that may be attributed to influences other than the economic factors specified. The second step examines the residuals resulting from the regression analysis by using a time-series technique known as intervention analysis. This technique allows a researcher to presume that a change that is noted in a time-series around the occurrence of an intervention is the effect of the intervention, itself (e.g., the investment tax credit).
The major conclusions of the dissertation are: (1) Qualified and total investment activity have been positively impacted by the enactment of and change in the rate of the investment tax credit. This conclusion is based upon noting a significant intervention effect in several time-series models for which the analysis was performed. (2) No intervention effect was noted in the study's control group. This supports the conclusion above and it also supports the assertion that there was not a shift in investment activity away from those assets that do not qualify for the investment tax credit to those assets that do qualify for the investment tax credit.
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