Graduation Year
2015
Date of Submission
4-2015
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics-Accounting
Reader 1
Ananda Ganguly
Terms of Use & License Information
Rights Information
© 2015 Keerthana S. Nunna
Abstract
The domestic production activities deduction (DPAD) was created to incentivize U.S. firms to produce within the U.S. and thereby increase domestic investing. I test whether the DPAD is a large enough incentive for firms to invest in the U.S. I used a simulation, and I found that without the DPAD incentive the firms never chose to produce within the U.S. With the DPAD incentive, only firms with relatively low costs of labor will produce domestically. These firms are rare and will not have a large impact on domestic investment and these firms increasing their production in the U.S. will not have a large impact on our employment rates. Therefore, the U.S. government is losing out on tax revenue without a large benefit to the economy. I also analyzed the DPAD at the state level. Currently 25 states allow the DPAD, but since it is a broad domestic deduction, these states might not be gaining the benefit of increased investing in their own state. Through a separate simulation and ANOVA tests on archival data, I found that states do not benefit from the DPAD.
Recommended Citation
Nunna, Keerthana, "Production Deduction, What’s Your Function?: Analyzing the Effectiveness of the Domestic Production Activities Deduction" (2015). CMC Senior Theses. 1137.
https://scholarship.claremont.edu/cmc_theses/1137
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
