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General equilibrium effects of investment incentives in Mexico

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  • Feltenstein, Andrew
  • Shah, Anwar

Abstract

Mexico has experimented with several tax instruments designed to promote private capital formation. Among such initiatives were general and industry-specific tax credits, employment tax credits, and corporate tax credits. The authors examine relative efficacy of such instruments using a dynamic computable general equilibrium model. They carry out model simulations using three equal-yield investment incentive scenarios: increases in investment tax credits, increases in employment tax credits, and an equivalent reduction in the corporate tax rate. The authors present outlines of the tax policy environment with model details and they highlight alternate tax incentives regimes. Conclusions and summary results are provided by the authors.
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Suggested Citation

  • Feltenstein, Andrew & Shah, Anwar, 1995. "General equilibrium effects of investment incentives in Mexico," Journal of Development Economics, Elsevier, vol. 46(2), pages 253-269, April.
    • Handle: RePEc:eee:deveco:v:46:y:1995:i:2:p:253-269
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    1. Auerbach, Alan J & Hines, James R, Jr, 1988. "Investment Tax Incentives and Frequent Tax Reforms," American Economic Review, American Economic Association, vol. 78(2), pages 211-216, May.
    2. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    3. Feltenstein, Andrew, 1986. "An intertemporal general equilibrium analysis of financial crowding out : A policy model and an application to Australia," Journal of Public Economics, Elsevier, vol. 31(1), pages 79-104, October.
    4. Shoven, John B, 1976. "The Incidence and Efficiency Effects of Taxes on Income from Capital," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1261-1283, December.
    5. Feltenstein, Andrew & Lebow, David & Sibert, Anne, 1988. "An analysis of the welfare implications of alternative exchange rate regimes: An intertemporal model with an application," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 611-629.
    6. Feltenstein, Andrew, 1992. "Oil prices and rural migration: the Dutch disease goes south," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 273-291, June.
    7. Feltenstein, Andrew & Morris, Stephen, 1990. "Fiscal stabilization and exchange rate instability : A theoretical approach and some policy conclusions using Mexican data," Journal of Public Economics, Elsevier, vol. 42(3), pages 329-356, August.
    8. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank.
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    Cited by:

    1. Cerqueti, Roy & Coppier, Raffaella, 2011. "Economic growth, corruption and tax evasion," Economic Modelling, Elsevier, vol. 28(1-2), pages 489-500, January.
    2. Emmanuel C. Mamatzakis, 2007. "An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry," CESifo Working Paper Series 2099, CESifo.
    3. Ms. Hélène Poirson, 2006. "The Tax System in India: Could Reform Spur Growth?," IMF Working Papers 2006/093, International Monetary Fund.
    4. Garsous, Grégoire & Corderi, David & Velasco, Mercedes & Colombo, Andrea, 2017. "Tax Incentives and Job Creation in the Tourism Sector of Brazil’s SUDENE Area," World Development, Elsevier, vol. 96(C), pages 87-101.
    5. Fofana, Ismael & Goundan, Anatole & Magne, Léa, 2014. "Simulation des impacts de la politique d’autosuffisance en riz de l’Afrique de l’ouest," Conference papers 332560, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Chen, Been-Lon & Chiang, Yeong-Yuh & Wang, Ping, 2005. "Evaluation of interest tax policies in a model of finance and growth," Journal of Macroeconomics, Elsevier, vol. 27(3), pages 533-552, September.
    7. Mamatzakis, E. & Tsionas, M., 2018. "Revisiting the returns of public infrastructure in Mexico: A limited information local likelihood estimation," Economic Modelling, Elsevier, vol. 75(C), pages 132-141.
    8. Kildegaard, Arne, 2001. "Fiscal reform, bank solvency, and the law of unintended consequences: a CGE analysis of Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 55-77, March.
    9. Venegas-Martinez, Francisco, 2001. "Temporary stabilization: A stochastic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 25(9), pages 1429-1449, September.
    10. repec:bla:devpol:v:23:y:2005:i:3:p:299-312 is not listed on IDEAS
    11. Garsous, Grégoire & Corderi, David & Velasco, Mercedes, 2015. "Tax Incentives and Job Creation in the Tourism Industry of Brazil," IDB Publications (Working Papers) 7324, Inter-American Development Bank.
    12. repec:dgr:rugsom:99c01 is not listed on IDEAS
    13. Ball, Sheryl & Feltenstein, Andrew, 1998. "Basic macroeconomic options for Bangladesh: A numerical analysis," Journal of Asian Economics, Elsevier, vol. 9(2), pages 281-305.
    14. Ramirez Verdugo, Arturo, 2005. "Tax Incentives and Business Investment: New Evidence from Mexico," MPRA Paper 2272, University Library of Munich, Germany, revised 04 Oct 2006.
    15. Thissen, Mark, 1998. "A classification of empirical CGE modelling," Research Report 99C01, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    16. Sungur Onur, 2019. "Spatial Distribution of Investment Incentives and the Impact of New Incentive System for Less Developed Regions in Turkey," Review of Economic Perspectives, Sciendo, vol. 19(1), pages 25-48, March.
    17. Feltenstein, Andrew & Ha, Jiming, 1999. "An analysis of the optimal provision of public infrastructure: a computational model using Mexican data," Journal of Development Economics, Elsevier, vol. 58(1), pages 219-230, February.
    18. Valery Leonidovich Makarov & Albert Raufovich Bakhtizin, 0. "Modern Methods of Forecasting of Consequences of Administrative Decisions," Administrative Consulting, Russian Presidential Academy of National Economy and Public Administration. North-West Institute of Management., issue 7.

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