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Transition Losses of Partially Mobile Industry-Specific Capital

Don Fullerton^1,2

¹ National Bureau of Economic Research · ² Princeton University

In estimating the economic effects of public policy, comparative static models typically assume homogenous factors that are either mobile or immobile. For changes designed to improve factor allocations, the former assumption would overstate welfare gains, while the latter would understate them. The model in this paper restricts each industry's capital reduction to its rate of depreciation. The stock of depreciated capital represents an industry-specific type of capital that may earn a lower equilibrium return. This model suggests that previous estimates of efficiency gains from integration of U. S. personal and corporate income taxes are overstated by $5 billion.

DOI

10.2307/1885569

Volume

98 (1)

Pages

107

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