The Effects of a Bonus Tax on Manager Compensation and Welfare
AbstractThis paper analyses the implications of a bonus tax for compensation components and firm profits, and studies its incidence as well as welfare implications. Using a principal-agent model with endogenous or exogenous reservation wages, we show how the effort-based compensation component changes in the country introducing the tax. Moreover, with exogenous reservation wages, the bonus tax negatively affects profits and dividends such that the incidence falls on the firm's shareholders. With endogenous reservation wages, the results are largely similar.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 68 (2012)
Issue (Month): 1 (March)
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Other versions of this item:
- Doina Maria Radulescu, 2010. "The Effects of a Bonus Tax on Manager Compensation and Welfare," CESifo Working Paper Series 3030, CESifo Group Munich.
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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