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on Public Finance |
| By: | Marc Rapp (Leipzig Graduate School of Management (HHL)) |
| Abstract: | This paper analyzes security income taxes in a dynamic two-period model of an economy that is part of a cluster of economies with perfectly integrated bond markets but locally segmented equity markets. For an economic income tax, it is shown that if tax proceeds are immediately redistributed within the cohort of market participants, taxation is non-distortionary in the sense that neither optimal production decisions of firms, nor the optimal aggregate consumption path or security prices are affected by taxation. If, however, tax proceeds are transferred to 'outsiders', i.e. non-market-participants, a shift in the tax rate in general affects the optimal aggregate consumption path and equilibrium security prices reflect the prevailing tax rate. While the equilibrium analysis is concerned with a rather stylized tax code, it is argued that the analysis may be interpreted as a partial equilibrium analysis of capital gains taxes within more general tax systems. |
| Keywords: | capital income tax, asset prices, home-bias, |
| JEL: | G12 G18 H24 |
| URL: | http://d.repec.org/n?u=RePEc:bep:dewple:2006-1-1162&r=pub |
| By: | J. Ignacio Conde-Ruiz; Paola Profeta |
| Abstract: | Countries with low intragenerational redistribution in social security systems (Bismarckian) are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than countries with more redistributive social security (Beveridgean). This paper introduces a bidimensional voting model to account for these features. Agents different in age, income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low-income agents, who gain from its redistributive feature, and high-income individuals, who seek to minimize their tax contribution and to invest in a private scheme. Middle-income individuals instead favor a large Bismarckian system. |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2007-07&r=pub |
| By: | Ramirez Verdugo, Arturo |
| Abstract: | This paper provides new evidence on the response of business investment to tax incentives. I use the variation provided by recent reforms to the Mexican corporate tax system, including the elimination and reintroduction of accelerated depreciation allowances applicable to investment undertaken outside the three main Mexican metropolitan areas. I show that investment is very sensitive to changes in tax variables and interest rates, with an estimated elasticity of investment with respect to the user cost around -2.0. The results are robust to different specifications and instrumental variables approaches. The large elasticity is shown to be the result of the large cross sectional variation in the user cost of capital and also a product of the small open economy nature of the Mexican economy. In particular, large investment responses of plants owned by multinational firms and a elasticity of imported assets considerably larger than that of domestically purchased goods. Furthermore, the use of panel data at the establishment level allows me to identify the discrete nature of investment decisions and to show that the capital accumulation pattern is consistent with nonconvex adjustment costs and irreversibilities, similar to those found for the US. Thus, the large elasticity compared to US estimates cannot be attributed to differences in adjustment costs. Finally, I provide evidence that the large investment response is not an artifact of misreporting or tax evasion since the elasticity of investment in other assets such as transportation equipment and land, which is harder to misreport, is also high. |
| Keywords: | Investment; taxes; user cost; manufacturing plants; Mexico |
| JEL: | E22 H25 E62 |
| Date: | 2005–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2272&r=pub |