Advanced Search
MyIDEAS: Login to save this paper or follow this series

Nonlinear Taxation of Risky Assets and Investment, With Application to Mining

Contents:

Author Info

  • Jeffrey MacKie-Mason

Abstract

An intertemporal capital asset valuation approach is applied to analyzing the effects of nonlinear taxes on asset values and optimal investment decisions. The method is quite general, and is illustrated both analytically and numerically, The paper studies the effects of nonlinearities in the corporate income tax, including the percentage depletion allowance, on mine values and investment decisions. Although the tax policies are found to have the expected effects on asset values, the effects on investment decisions are sometimes perverse. An increase in the income tax rate may encourage investment; an increase in the depletion allowance subsidy may discourage investment.

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.nber.org/papers/w2631.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2631.

as in new window
Length:
Date of creation: Jun 1988
Date of revision:
Publication status: published as "Some Nonlinear Tax Effects on Asset Values and Investment Decisions Under Uncertainty," Journal of Public Economics, Vol. 42, pp. 301-328, August 1990.
Handle: RePEc:nbr:nberwo:2631

Note: PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

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. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 85(338), pages 272-87, June.
  2. Constantinides, George M, 1978. "Market Risk Adjustment in Project Valuation," Journal of Finance, American Finance Association, American Finance Association, vol. 33(2), pages 603-16, May.
  3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  4. Pindyck, Robert S, 1980. "Uncertainty and Exhaustible Resource Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(6), pages 1203-25, December.
  5. Merton, Robert C., 1977. "On the pricing of contingent claims and the Modigliani-Miller theorem," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 241-249, November.
  6. Jeremy I. Bulow & Lawrence H. Summers, 1982. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc.
  7. Geske, Robert & Shastri, Kuldeep, 1985. "Valuation by Approximation: A Comparison of Alternative Option Valuation Techniques," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 20(01), pages 45-71, March.
  8. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521297615.
  9. Brennan, Michael J. & Schwartz, Eduardo S., 1978. "Finite Difference Methods and Jump Processes Arising in the Pricing of Contingent Claims: A Synthesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 13(03), pages 461-474, September.
  10. Gamponia, Villamor & Mendelsohn, Robert, 1985. "The Taxation of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 165-81, February.
  11. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 58(2), pages 135-57, April.
  12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 225-243, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. He, Hua & Pindyck, Robert S., 1992. "Investments in flexible production capacity," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 16(3-4), pages 575-599.
  2. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.

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:nbr:nberwo:2631. 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: ().

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.