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Corporate taxation, incumbency advantage and entry

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Author Info

  • Elie Appelbaum

    ()
    (Department of Economics, York University)

  • Eliakim Katz

Abstract

It is the purpose of this paper to show that corporation tax may affect industrial structure. Analyzing the effects of corporation tax, we demonstrate that it tends to favour incumbents over entrants. We further show that the effect of this advantage on an incumbent's output depends on his profit or loss history. An incumbent with a past profit is likely to produce a greater output, thereby partially or fully crowding out an entrant's output. In contrast, an incumbent with a past loss is more likely to produce a smaller output, making entry easier.

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Bibliographic Info

Paper provided by York University, Department of Economics in its series Working Papers with number 1996_12.

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Length: 12 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:yca:wpaper:1996_12

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Related research

Keywords: Corporate taxation; Industrial structure; Incumbency advantage;

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References

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  1. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2010. "Entrepreneurship, Firm Entry, and the Taxation of Corporate Income: Evidence from Europe," Discussion Paper 2010-026, Tilburg University, Tilburg Law and Economic Center.
  2. E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-69, May.
  3. Richard Kneller & Danny McGowan, . "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 11/08, University of Nottingham, School of Economics.
  4. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2008. "Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61)," Discussion Paper 2008-65, Tilburg University, Center for Economic Research.
  5. Alan J. Auerbach, 1983. "The Dynamic Effects of Tax Law Asymmetries," NBER Working Papers 1152, National Bureau of Economic Research, Inc.
  6. Jakopin, Nejc M. & Klein, Andreas, 2012. "First-mover and incumbency advantages in mobile telecommunications," Journal of Business Research, Elsevier, vol. 65(3), pages 362-370.
  7. Cooper, Ian & Franks, Julian R, 1983. " The Interaction of Financing and Investment Decisions When the Firm Has Unused Tax Credits," Journal of Finance, American Finance Association, vol. 38(2), pages 571-83, May.
  8. Michel Poitevin, 1998. "Effects of the Fiscal Treatment of Tax Losses on the Efficiency of Markets and the Incidence of Mergers," CIRANO Working Papers 98s-33, CIRANO.
  9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  10. Davidson, Carl & Martin, Lawrence W, 1985. "General Equilibrium Tax Incidence under Imperfect Competition: A Quantity-setting Supergame Analysis," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1212-23, December.
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Citations

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Cited by:
  1. Da Rin, Marco & Di Giacomo, Marina & Sembenelli, Alessandro, 2011. "Entrepreneurship, firm entry, and the taxation of corporate income: Evidence from Europe," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1048-1066, October.
  2. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2008. "Firm Entry Dynamics and Taxation of Corporate Profits: Evidence from Europe (Replaced by DP 2009-61)," Discussion Paper 2008-65, Tilburg University, Center for Economic Research.
  3. Richard Kneller & Danny McGowan, . "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 11/08, University of Nottingham, School of Economics.
  4. Jakopin, Nejc M. & Klein, Andreas, 2012. "First-mover and incumbency advantages in mobile telecommunications," Journal of Business Research, Elsevier, vol. 65(3), pages 362-370.
  5. E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-69, May.

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