Capacity Utilization, the User Cost of Capital and the Cost of Adjustment

Tax incentives have been provided in many countries with the ultimate goal of making the cost of capital cheaper and thus enabling the development process through the increase of investment expenditures. The study of the role of tax incentives in investment spending has been made possible through the use of the neoclassical theory of optimum capital accumulation. This theory has been used in this article to indicate that incentive provisions may not always be operative at the margin, and thus having no effect in  the formulation of the value of depreciation allowances and further on the value of the implicit rental price of capital. Variations in the value of the user cost of capital can make an investment project cheaper or more expensive in relation to various time periods. This could not be proved for the case of Greece.

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Determinants of investment in Namibia

Corporate Ownership and Control ◽

10.22495/cocv10i4art2 ◽

2013 ◽

Vol 10 (4) ◽

pp. 21-30

Author(s):

Joel Hinaunye Eita

Keyword(s):

Financial Development ◽

Cost Of Capital ◽

Positive Impact ◽

User Cost ◽

Real Gdp ◽

Negative Effect ◽

The Cost ◽

Investment Goods ◽

Domestic Products ◽

Positive Effect

This paper presents an analysis of the determinants of investment in Namibia for the period 1971 to 2010. The results indicate that investment in Namibia can be raised by increasing real GDP, openness and financial development, and by decreasing the user cost of capital. Although saving has an expected positive coefficient, it is statistically insignificant. This suggests that saving is necessary, but not sufficient to accelerate investment in Namibia. The positive effect of effect of openness implies that increase in exports generated foreign exchange earnings necessary to purchase the imported capital goods and expand the market for domestic products. Increase in imports enabled the country to have greater access to investment goods in the international market and accelerates investment. A positive impact of financial development suggests that the financial sector is important in facilitating the channeling of resources from savers to investment activities that offer high return. The negative effect of user cost of capital implies that investment in Namibia can be accelerated by reducing the cost of capital.

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Tax Incentive Provisions And The User Cost Of Capital: The Case Of Greece

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v22i2.1436 ◽

2011 ◽

Vol 22 (2) ◽

Author(s):

Thomas A. Anastassiou

Keyword(s):

Cost Of Capital ◽

Tax Credits ◽

User Cost ◽

Incentive Structure ◽

Tax Incentive ◽

Capital Spending ◽

Policy Measures ◽

The Cost ◽

Quantitative Influence ◽

Of Greece

According to the neoclassical framework the quantitative influence of tax policy measures on capital spending is exercised through the parameters that define the desired stock of capital and more specifically through the user cost determinant (c). A tax-adjusted user cost expression is formulated and time series of user cost are calculated using the usual tax parameters (like depreciation allowances, tax credits, investment grants, investment allowances and the like) that are incorporated in the value of c and which have been taken from the Greek tax incentive structure. The test of fiscal parameters on investment was made for the two kinds of capital assets, equipment and structures, since expenditure on these two comprise on average an almost 85 per cent of total manufacturing investment in Greece. What the research showed for the period under investigation was that c, the cost of capital variable, was not affected much by tax provisions, and in its turn could not affect decisively the desired level of capital stock and thus the amount of net investment.(JEL: E62)

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