The paper shows how a tax holiday may signal to a skepticalcapital market that the future level of taxation will be moderate.After the signal has informed investors that the host countrygovernment is a low-spender, the tax profile flattens out, correspondingto a tax reform stage. Contrary to the recent literature on taxholidays, this model assumes that: the capital market is perfectlycompetitive; sunk costs are captured by a convex cost function,instead of fixed costs; taxation is distortionary, not lump-sum;and the government maximizes a welfare function rather than taxrevenue. Copyright Kluwer Academic Publishers 1997
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Bond, Eric W & Samuelson, Larry, 1986.
"Tax Holidays as Signals,"
American Economic Review,
American Economic Association, vol. 76(4), pages 820-26, September.
[Downloadable!] (restricted)
King, Ian & Welling, Linda, 1992.
"Commitment, Efficiency and Footloose Firms,"
Economica,
London School of Economics and Political Science, vol. 59(233), pages 63-73, February.
[Downloadable!] (restricted)
Other versions: