FARM MACHINERY INVESTMENT AND THE TAX REFORM ACT OF 1986

The Tax Reform Act of 1986 significantly changed incentives for investing. This analysis specifically examines how changes in marginal tax rates, depreciation schedules, and the investment tax credit altered the cost of capital and net investment in agriculture. A stochastic coefficients econometric methodology is used to estimate an investment function which is then used to simulate the effects of tax reform. Estimates indicated that relative to prior law, the Tax Reform Act will reduce the capital stock of farm machinery and equipment by nearly $4 billion.Agricultural Finance, Farm Management,

The Impacts on Capital Allocation of Some Aspects of the Economic Recovery Tax Act of 1981

This paper develops and employs a five-asset, four-household and single-business sector simulation model to measure the long-run impacts of the major provisions of the Economic Recovery Tax Act of 1981 on the allocation of a fixed capital stock among owner-occupied housing, rental housing, and nonresidential capital. The specific provisions analyzed are the increases in tax depreciation for nonresidential capital and rental housing and the reduction in the maximum tax rate on unearned income. Our analysis suggests a 6 percent increase in nonresidential capital, an 11 percent decline in owner-occupied housing and little change in rental housing (the increase in the number of renters -- the homeownership rate declines by 1 1/2 percentage points -- offsets a decline in the quantity of rental services demanded per renter). In the absence of an increase in aggregate saving, real pretax interest rates rise by nearly two percentage points. Corporate profit taxes decline by 60 percent, and after-tax earnings rise by 25 percent. As a result of the Act, the net (of depreciation) user costs for the three types of capital will almost be equalized.

Leaving home and housing prices. The experience of Italian youth emancipation

This paper provides an explanation for the postponement of youth emancipation in the Italian context mainly characterized by a sharp increase in both house and rent prices together with stagnant disposable income over the past decade. We first assemble a unique database related to the housing and rental market which is then matched with household characteristics. We find that the probability of leaving home decreases by about half percentage point and one percentage point for males and females, respectively, for a one-standard-deviation change in house prices. Together with property prices, local labour markets play a prominent role in determining decisions by unemployed youths to postpone the transition. The youngest cohort was mainly affected by the real estate market evolution that occurred in the last decade.coresidence, moving out, real estate market, discrete time duration model.

REDUCING CUSTOMER WAIT TIME AND IMPROVING PROCESSES AT ABC’s ATV RENTALS

This project serves to explore the system bottlenecks of a small, family owned ATV rental company. The main objective is to reduce the average time a customer spends in the system, focusing on customer wait time as well as other areas that can be improved. This was done by collecting time studies and inputting the values into simulation software, which was run to represent the current system as well as various other possible scenarios encountered by rental companies. While creating the simulation, adaptive techniques were incorporated into the simulation. These techniques aim to increase the durability and reusability of the simulation for future use. An example of incorporating adaptive simulation is through having the simulation software draw values from an Excel spreadsheet. This example of adaptive simulation targets the efficiency of use, as values and formulas are easier to calculate and visualize in Excel than the simulation software. Through the scenarios created in the simulation software, the main system bottleneck was discovered to be the company’s trailer fleet size. Several scenarios were then created to further explore the theory and resulted in confirming it. The results of this analysis conclude that to reduce customer wait time in the system, the company should increase its fleet size by one trailer. A secondary, no cost solution is to eliminate ATV load/unload times by moving ATVs to the dunes prior to customer arrival instead of loading them on a customer by customer basis

Discrete-continuous analysis of optimal equipment replacement

In Operations Research, the equipment replacement process is usually modeled in discrete time. The optimal replacement strategies are found from discrete (or integer) programming problems, well known for their analytic and computational complexity. An alternative approach is represented by continuous-time vintage capital models that explicitly involve the equipment lifetime and are described by nonlinear integral equations. Then the optimal replacement is determined via the optimal control of such equations. These two alternative techniques describe essentially the same controlled dynamic process. We introduce and analyze a model that unites both approaches. The obtained results allow us to explore such important effects in optimal asset replacement as the transition and long-term dynamics, clustering and splitting of replaced assets, and the impact of improving technology and discounting. In particular, we demonstrate that the cluster splitting is possible in our replacement model with given demand in the case of an increasinTheoretical findings are illustrated with numeric examples.vintage capital models, optimization, equipment lifetime, discrete-continuous models.

Tax Policy and Business Fixed Investment During the Regan Era

We examine the impact of major tax legislation on business capital investment during the 1980-88 period. We detail the tax changes and imbed them into a neoclassical rental price of capital goods. We then use this rental price in two popular models of business fixed investment, a standard and a modified neo-classical model. We estimate these two models along with an accelerator model of capital investment. The models, in general, exhibit parameter instability regardless of fit. We then develop a model incorporating expected delivery lags for new capital goods and embed a forecasted output and the rental price of capital services. Again, parameter instability and fit are examined. Finally we conduct simulations of tax, price and output shocks. We conclude that the new model has parameter stability, and that the net effect of Reagan's tax policies was small

Constructing a price deflator for R&D: calculating the price of knowledge investments as a residual

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Long-Run Effects of the Accelerated Cost Recovery System

Much of the debate surrounding the enactment of President Reagan's tax plan was concerned with the short run effects of macroeconomic stimulation. Now that the Economic Recovery Tax Act of 1981 has become law, it is appropriate to look again at the long run effect of these tax cuts. This paper measures, for 37 different assets and for 18 different industries, the reduction in effective corporate tax rates that result from the acceleration of depreciation allowances and the expansion of the investment tax credit. It also uses a detailed dynamic general equilibrium model of the U.S. economy to simulate the effects of the new Accelerated Cost Recovery System (ACRS) on revenues, investment, long run growth, and capital allocation among industries. We find significant welfare gains from ACRS, but we find larger welfare gains from alternative plans that were not adopted.