Capital income taxation in a growing open economy

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

The paper studies the dynamic macroeconomic effects of various forms of capital income taxation in a model of a small open economy with perfect mobility of financial capital and intertemporal optimization on the part of households and firms. One of the noteworthy results is that the introduction of a (low) corporate income tax will not affect consumption in the long run, but will simply lead to a replacement of shares by foreign financial assets in household portfolios. It is also found that an anticipated investment tax credit can have and that an anticipated dividend tax will have contractionary effects on investment before they are introduced. Moreover, it is shown that while an unanticipated dividend tax is neutral with respect to investment, it will have real effects on consumption and net foreign assets in a growing economy
OriginalsprogEngelsk
TidsskriftEuropean Economic Review
Vol/bind35
Udgave nummer1
Sider (fra-til)179-197
ISSN0014-2921
DOI
StatusUdgivet - 1991

ID: 158263