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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.

Suggested Citation

  • Kai A. Konrad, 1990. "A note on depreciation allowances, taxation and risk-taking," Finnish Economic Papers, Finnish Economic Association, vol. 3(2), pages 161-165, Autumn.
    • Handle: RePEc:fep:journl:v:3:y:1990:i:2:p:161-165
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    References listed on IDEAS

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