Tax and credit aids to industrial development in Southern Italy: a comment on methodology

Abstract

In their interesting article, “Tax and Credit Aids to Industrial Development in Southern Italy”, G. Ackley and L. Dini analysed the influence of tax encouragements and special credit facilities on the relative attractiveness of investments in the North and South of Italy. To accomplish their objectives the authors made a number of simplifying assumptions. In the present note, the author explores the nature of the bias in the Ackley-Dini methodology. In particular cases in the real world there is no reason to believe the author’s assumptions will be applicable, and thus it is argued that the use of the method set out in their article can yield seriously misleading results. JEL: H81, O14, O18

Keywords

• Tax aids
• special credit facilities
• investment
• Italy
• bias
• methodology