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How does the type of subsidization affect investments: Experimental evidence

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  • Ackermann, Hagen

Abstract

I study how different types of subsidization affect investment decisions in a laboratory experiment. Even though the expected pro t is identical in all treatments, I find highly significant differences between them. In particular, when investment alternatives get subsidized with tax credits the willingness to invest in the subsidized alternative increases remarkably. In addition, the willingness to take risks increases in general, when tax credits are introduced. Hence, tax credits might be more effective in promoting investments.

Suggested Citation

  • Ackermann, Hagen, 2015. "How does the type of subsidization affect investments: Experimental evidence," arqus Discussion Papers in Quantitative Tax Research 185, arqus - Arbeitskreis Quantitative Steuerlehre.
    • Handle: RePEc:zbw:arqudp:185
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    Cited by:

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    More about this item

    Keywords

    behavioral economics; subsidies; tax incentives; distorting subsidization; real investment; risk-taking behavior;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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