Technology, Capital Spending, and Capacity Utilization

Increasing returns, capital utilization, and the effects of government spending

We show that a one-sector real business cycle model with mild increasing returns-to-scale, variable capital utilization and saddle-path stability is able to produce qualitatively realistic business cycles driven solely by disturbances to government purchases. Due to an endogenous increase in labor productivity, a positive spending shock can lead to simultaneous increases in output, consumption,...

Taxation and Capital Spending

Integration of varying capacity utilization into dynamic capital theory

Literature in capital theory takes it for granted that the capital stock is quasi-…xed and always fully utilized and that net investment to the capital stock is the main source of variation in capital input. This study integrates varying capacity utilization into capital investment models with irreversibility under uncertainty. The result shows that the capacity utilization rate varies as uncer...

Increasing Returns, Capital Utilization, and the E¤ects of Government Spending¤

We show that a one-sector real business cycle model with mild increasing returns-toscale and variable capital utilization is able to produce qualitatively realistic business cycles driven solely by aggregate demand shocks. In particular, a positive government spending shock can lead to simultaneous increases in output, consumption, investment, employment, labor productivity and the real wage. O...

State Capacity, Capital Mobility, and Tax Competition

Abstract The theory of international tax competition suggests that governments attempt to attract mobile capital bases by undercutting the foreign capital tax rate. An analysis of the role that state capacity plays in tax policymaking under international pressures is, however, missing. The central contribution of our study is to highlight the importance of the interaction between state capaci...