Capital Tax Reform, Corporate Finance, and Economic Growth and Welfare

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Capital Tax Reform, Corporate Finance, and Economic Growth and Welfare

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Holger Strulik ()

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Holger Strulik

Abstract

Recent empirical studies have revealed a strong impact of tax changes on corporate finance. Yet, models of economic growth usually neglect financial structure of the representative firm. In order to investigate whether the consideration of firm finance modifies the estimated outcome of capital tax reforms, a corporate sector is introduced in three popular popular models of economic growth. The paper explores analytically the impact of taxation on structures of finance and production and gives a quantitative reassessment of growth and welfare effects of tax reforms in the U.S. economy. A general result is that standard models of exogenous and endogenous growth overestimate the growth effect and underestimate the welfare gain from tax reform.

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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 19908.

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Date of creation: Oct 1999
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Handle: RePEc:ham:qmwops:19908

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Article
- Strulik, Holger, 2003. "Capital tax reform, corporate finance, and economic growth and welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 595-615, December. [Downloadable!] (restricted)

Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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Cited by:
(explanations, 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.)

Michael Funke & Holger Strulik, 2004. "Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act," Macroeconomics 0401009, EconWPA. [Downloadable!]
Other versions:
- Michael Funke & Holger Strulik, 2003. "Taxation, Growth and Welfare: Dynamic Effects of Estonia´s 2000 Income Tax Act," Quantitative Macroeconomics Working Papers 20304, Hamburg University, Department of Economics. [Downloadable!]
- Funke, Michael & Strulik, Holger, 2003. "Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act," BOFIT Discussion Papers 10/2003, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
- Michael Funke & Holger Strulik, 2006. "Taxation, Growth and Welfare: Dynamic Effects of Estonia's 2000 Income Tax Act," Finnish Economic Papers, Finnish Society for Economic Research, vol. 19(1), pages 25-38, Spring. [Downloadable!]
Michael Funke & Holger Strulik, 2005. "BOFIT Discussion Papers - Taxation, growth and welfare: Dynamic effects of Estonia’s income tax act," Money Macro and Finance (MMF) Research Group Conference 2005 55, Money Macro and Finance Research Group. [Downloadable!]

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