The Credit Channel of Capital Tax Policy
AbstractA neoclassical growth model is augmented by a corporate sector, financial intermediation, and a set of tax rates. In this setting, capital structure is determined by the interplay between a tax advantage of debt finance and costly state verification entailed by asymmetric information. Effects of capital tax reforms are investigated with a special focus on this micro-founded credit channel of tax policy. The theoretical part of the paper establishes a new, institution-based view on the motivation of debt finance in general equilibrium and derives financial and real effects of private and corporate income tax policies. Using a calibration with U.S. data, the applied part demonstrates that tax cuts cause significant adjustments of capital structure. Nevertheless, it turns out that the credit channel generates relatively small effects of tax reforms on consumption, investment, and growth. Copyright � 2008 Wiley Periodicals, Inc..
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.
Volume (Year): 10 (2008)
Issue (Month): 5 (October)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Strulik, Holger & Trimborn, Timo, 2012.
"Laffer strikes again: Dynamic scoring of capital taxes,"
European Economic Review,
Elsevier, vol. 56(6), pages 1180-1199.
- Strulik, Holger & Trimborn, Timo, 2010. "Laffer Strikes Again: Dynamic Scoring of Capital Taxes," Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover dp-454, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Holger Strulik & Timo Trimborn, 2011. "Laffer Strikes Again: Dynamic Scoring of Capital Taxes," DEGIT Conference Papers c016_074, DEGIT, Dynamics, Economic Growth, and International Trade.
- Strulik, Holger & Trimborn, Timo, 2010.
"Anticipated tax reforms and temporary tax cuts: A general equilibrium analysis,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 34(10), pages 2141-2158, October.
- Strulik, Holger & Trimborn, Timo, 2008. "Anticipated Tax Reforms and Temporary Tax Cuts: A General Equilibrium Analysis," Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover dp-406, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.