Investment, Overhang, and Tax Policy

Authors:
  • MDMihir A. (Mihir Arvind) Desai
    Mihir A. (Mihir Arvind) Desai
  • AGAustan Goolsbee
    Austan Goolsbee
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Abstract
The past decade has seen an unusual pattern of investment. The boom of the 1990s generated unusually high investment rates, particularly in equipment, and the bust of the 2000s witnessed an unusually large decline in investment. A drop in equipment investment normally accounts for about 10 to 20 percent of the decline in GDP during a recession; in the 2001 recession, however, it accounted for 120 percent.1