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Intangible investment and Ramsey capital taxation

  • Conesa, Juan C.
  • Domínguez, Begoña

The standard analysis of optimal fiscal policy aggregates different types of assets into a unique capital good and all types of capital taxes into a unique capital tax. This paper considers a disaggregated framework: an economy with corporate and dividend taxes, where firms invest in both tangible and intangible assets (which can be expensed or sweat). In our setup, firms can always respond to changes in the timing of taxation. We find that the optimal long-run policy features zero corporate taxes and positive dividend taxes, with labor and dividend taxes being identical. Moreover, the initial capital levy is relatively small.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 60 (2013)
Issue (Month): 8 ()
Pages: 983-995

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Handle: RePEc:eee:moneco:v:60:y:2013:i:8:p:983-995
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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