Capital tax reform, corporate finance, and economic growth and welfare
✍ Scribed by Holger Strulik
- Publisher
- Elsevier Science
- Year
- 2003
- Tongue
- English
- Weight
- 484 KB
- Volume
- 28
- Category
- Article
- ISSN
- 0165-1889
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✦ Synopsis
Recent empirical studies have revealed a strong impact of tax changes on corporate ÿnance. Yet, models of economic growth usually neglect ÿnancial structure of the representative ÿrm. In order to investigate whether the consideration of ÿrm ÿnance modiÿes the estimated outcome of capital tax reforms, a corporate sector is introduced in three popular models of economic growth. The paper explores analytically the impact of taxation on structures of ÿnance and production and gives a quantitative reassessment of growth and welfare e ects of tax reforms in the U.S. economy. A general result is that standard models of exogenous and endogenous growth overestimate the growth e ect and underestimate the welfare gain from tax reform.