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Intangible investment and Ramsey capital taxation

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  • Conesa, Juan C.
  • Domínguez, Begoña

Abstract

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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  • Conesa, Juan C. & Domínguez, Begoña, 2013. "Intangible investment and Ramsey capital taxation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 983-995.
  • Handle: RePEc:eee:moneco:v:60:y:2013:i:8:p:983-995
    DOI: 10.1016/j.jmoneco.2013.09.004
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    Cited by:

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    2. Chari, V.V. & Nicolini, Juan Pablo & Teles, Pedro, 2020. "Optimal capital taxation revisited," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 147-165.
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    4. Erosa, Andrés & González, Beatriz, 2019. "Taxation and the life cycle of firms," Journal of Monetary Economics, Elsevier, vol. 105(C), pages 114-130.
    5. Slavik, Ctirad & Yazici, Hakki, 2014. "On the Consequences of Eliminating Capital Tax Differentials," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100479, Verein für Socialpolitik / German Economic Association.
    6. Davide Debortoli & Pedro Gomes, 2014. "Technological change and the decline of public investment," Economics Working Papers 1685, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Simon Bösenberg & Peter Egger & Benedikt Zoller-Rydzek, 2018. "Capital taxation, investment, growth, and welfare," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 325-376, April.
    8. van Rens, Thijs & Vukotic, Marija, 2020. "Delayed Adjustment and Persistence in Macroeconomic Models," The Warwick Economics Research Paper Series (TWERPS) 1245, University of Warwick, Department of Economics.
    9. Talukdar, Bidyut, 2017. "Learning-by-doing, organizational capital and optimal markup variations," The Journal of Economic Asymmetries, Elsevier, vol. 15(C), pages 39-47.
    10. Pedro Gomes & Davide Debortoli, 2012. "Labor and Profit Taxation, and the Supply of Public Capital," 2012 Meeting Papers 325, Society for Economic Dynamics.

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