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Taxation, Growth and Welfare: Dynamic Effects of Estonia´s 2000 Income Tax Act

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Author Info
Michael Funke ()
Holger Strulik ()

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Abstract

This paper analyses the long run effects of the 2000 Income Tax Act in Estonia in a dynamic equilibrium model. It studiesthe impact of the shift from an imputation system to a system in which companies pay taxes only with respect to distributed profits.Balanced growth paths, transitional dynamics and welfare costs are computed. We show that the 2000 Estonian Income Tax Act leads to higher per capita income and investment but lower welfare. A sensitivity analysis shows that the results are rather robust.

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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20304.

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Date of creation: Apr 2003
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Handle: RePEc:ham:qmwops:20304

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Related research
Keywords: Growth Welfare Taxation Tax Reform Estonia

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Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

References listed on IDEAS
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    Other versions:
  3. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December. [Downloadable!] (restricted)
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  4. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  20. Judd, Kenneth L, 1987. "The Welfare Cost of Factor Taxation in a Perfect-Foresight Model," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 675-709, August. [Downloadable!] (restricted)
    Other versions:
  21. Liam P. Ebrill, 1999. "Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 182, International Monetary Fund.
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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.)

  1. Aaro Hazak, 2006. "Dividend Decision under Distributed Profit Taxation: Investor’s Perspective," Working Papers 145, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  2. Aaro Hazak, 2007. "Companies’ Financial Decisions under the Distributed Profit Taxation Regime of Estonia," Working Papers 155, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
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