AbstractThe purpose of this study was to estimate the impact of changes in Federal tax policy on investment behavior in the chemicals and allied products industry and to examine the possibility of a differential impact of changes in tax policy on investment behavior in manufacturing industries. The impact of changes in tax policy on investment behavior in the chemical and allied products industry was estimated and compared with the impact of tax policy on investment behavior in total manufacturing found in earlier studies. The model used to estimate the impact of changes in tax policy on investment behavior in the chemicals and allied products industry was the neo‐classical model of capital accumulation as formulated initially by Dale Jorgenson.The conclusions reached were that changes in tax policy have had a measurable impact on investment behavior in the chemical and allied products industry which was greater as a percentage of gross investment than that found on total manufacturing in earlier studie