This paper examines how business investment responds to investment tax credit, as enacted by Italy’s Law 388/2000. To assess whether the programme made possible investments that otherwise would not have been made, it exploits some features of the tax credit scheme, such as the fact that some Italian regions are not deemed eligible or that the amount of the bonus differs across eligible regions. Although the programme was fiscally unsustainable, and was therefore downsized well ahead of the expiry date, our findings suggest that it has been effective in stimulating investment.
Published in 2008 in: Rivista di politica economica, v. 98, 4, pp. 79-112
