Advanced Search
MyIDEAS: Login

Does Incorporation Matter? Quantifying the Welfare Loss of Non-Uniform Taxation across Sectors

Contents:

Author Info

  • Doina Maria Radulescu
  • Michael Stimmelmayr

Abstract

According to Harberger’s 1962 and 1966 seminal papers, the corporate income tax distorts the allocation of capital between the corporate and the non-corporate sector and reduces therefore aggregate output. To quantify this efficiency loss we apply a dynamic, computable, general equilibrium growth model. We compare the allocation of capital under the current, non-uniform German tax system with the allocation of capital arising from a hypothetical, sector neutral tax system where both sectors face the same effective tax burden. Our numerical results underpin the theoretical finding, that the loss in overall output is highly sensitive to the source of investment funds. Accordingly, if investments are exclusively financed via new share issues the efficiency loss amounts to nearly 2 percent of aggregate output. However, if less than half of overall investments are financed via new equity injections the efficiency loss is almost negligible.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-Ifo_Working_Papers/wp-ifo-2005-2010/IfoWorkingPaper-26.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Papers No. 26.

as in new window
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ifowps:_26

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo-group.de
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Mackie-Mason, Jeffrey K & Gordon, Roger H, 1997. " How Much Do Taxes Discourage Incorporation?," Journal of Finance, American Finance Association, vol. 52(2), pages 477-505, June.
  2. Hans-Werner Sinn, 1991. "Taxation and the Cost of Capital: The "Old" View, the "New" View, and Another View," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 25-54 National Bureau of Economic Research, Inc.
  3. Hermann, Rico A. & Spengel, Christoph & Jacobs, Otto H. & Stetter, Thorsten, 2003. "Steueroptimale Rechtsformwahl: Personengesellschaften besser als Kapitalgesellschaften," ZEW Discussion Papers 03-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Gravelle, Jane G & Kotlikoff, Laurence J, 1989. "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 749-80, August.
  5. Gravelle, Jane G & Kotlikoff, Laurence J, 1993. "Corporate Tax Incidence and Inefficiency When Corporate and Noncorporate Goods Are Close Substitutes," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 501-16, October.
  6. MacKie-Mason, Jeffrey K, 1990. " Do Taxes Affect Corporate Financing Decisions?," Journal of Finance, American Finance Association, vol. 45(5), pages 1471-93, December.
  7. Roger H. Gordon & Jeffrey K. MacKie-Mason, 1992. "Tax Distortions to the Choice of Organizational Form," NBER Working Papers 4227, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ifowps:_26. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.