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A note on depreciation allowances, taxation and risk-taking

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  • Kai A. Konrad

    (University of Munich)

Abstract

Incentive effects of depreciation rules for risk-taking are considered. If true economic depreciation is stochastic, profit taxes with expected-value depreciation allowances decrease risk-taking. However, if real capital is used only in the risky sector, more generous depreciation allowances increase risk-taking. It is also shown that the incentive effect of risk-taking-revenue taxes to increase the risky fraction ofinvestment is stronger in the case ofmore generous depreciation allowances.

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File URL: http://taloustieteellinenyhdistys.fi/images/stories/fep/f1990_2g.pdf
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Bibliographic Info

Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 3 (1990)
Issue (Month): 2 (Autumn)
Pages: 161-165

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Handle: RePEc:fep:journl:v:3:y:1990:i:2:p:161-165

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Web page: http://www.taloustieteellinenyhdistys.fi
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  1. Koskela, Erkki & Kanniainen, Vesa, 1984. "Changing the Tax Base and Risk-Taking," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 162-74, March.
  2. Boadway, R. W. & Bruce, N., 1979. "Depreciation and interest deductions and the effect of the corporation income tax on investment," Journal of Public Economics, Elsevier, vol. 11(1), pages 93-105, February.
  3. Sandmo, Agnar, 1977. "Portfolio Theory, Asset Demand and Taxation: Comparative Statics with Many Assets," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 369-79, June.
  4. Syed M. Ahsan, 1990. "Risk-Taking, Savings, and Taxation: A Re-examination of Theory and Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 408-33, May.
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