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Capital Taxation During the U.S. Great Depression

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  • Ellen R. McGrattan

Abstract

Previous studies of the U.S. Great Depression find that increased government spending and taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax. The contribution is much greater when the analysis includes other types of capital taxes. A general equilibrium model extended to include taxes on dividends, property, capital stock, excess profits, and undistributed profits predicts patterns of output, investment, and hours worked that are more like those in the 1930s than found in earlier studies. The greatest effects come from the increased taxes on corporate dividends and undistributed profits. JEL Codes: E13, E32, H25 Copyright 2012, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 3 ()
Pages: 1515-1550

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:3:p:1515-1550

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  1. Chetty, Raj & Saez, Emmanuel, 2004. "Dividend Taxes and Corporate Behaviour: Evidence from the 2003 Dividend Tax Cut," CEPR Discussion Papers 4722, C.E.P.R. Discussion Papers.
  2. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
  3. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  4. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  5. Timothy J. Kehoe & Edward C. Prescott (), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
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Cited by:
  1. Anagnostopoulos, Alexis & Cárceles-Poveda, Eva & Lin, Danmo, 2012. "Dividend and capital gains taxation under incomplete markets," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 599-611.
  2. Benjamin Born & Alexandra Peter & Johannes Pfeifer, 2011. "Fiscal News and Macroeconomic Volatility," Bonn Econ Discussion Papers bgse08_2011, University of Bonn, Germany.
  3. Davig, Troy A. & Foerster, Andrew T., 2014. "Uncertainty and fiscal cliffs," Research Working Paper RWP 14-4, Federal Reserve Bank of Kansas City.

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