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

Terms of Use for work posted in Scholarship@Claremont.

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.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff. It is not available for interlibrary loan. Please send a request for access through Contact Us.

Share

COinS