Aggregate implications of the tax reform of 2017: Can taxes guide technology?

This paper analyzes the effects of the US tax reform of 2017 using a model of endogenous technological adoption. The lower tax levels induce large human capital investments that are augmented by the endogenous transition towards skill biased technologies. •Tax effects are amplified in a model of endogenous technological adoption.•The 2017 Tax reform implies a partial substitution of physical capital by human capital.•The 2017 Tax reform incentivizes the adoption of ever more skill-biased technologies.