IDEAS home Printed from https://ideas.repec.org/a/euf/qreuro/0124-04.html
   My bibliography  Save this article

Corporate taxation and the composition of capital

Author

Listed:
  • Serena Fatica

Abstract

This chapter provides evidence on the responsiveness of investment to business tax incentives measured by the tax-adjusted user cost of capital. Departing from the existing empirical literature, which mostly looks at aggregate investment, it focuses on different types of capital assets. The study shows that when asset heterogeneity is explicitly accounted for, corporate taxation might not only have negative impacts on the level of investment, but also affect its composition, and thus, the composition of the aggregate capital stock. Given the magnitude of the estimated cost elasticity, and the substitution patterns across assets, the results suggest that high taxation at the margin might be particularly detrimental for investment in ICT capital, rather than in more traditional asset types, such as non-ICT equipment and buildings. All in all, the study corroborates the view that taxation may play a significant role at the current juncture in supporting the recovery by stimulating investment, particularly in capital assets that have a significant impact on growth.

Suggested Citation

  • Serena Fatica, 2013. "Corporate taxation and the composition of capital," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 12(4), pages 37-44, December.
  • Handle: RePEc:euf:qreuro:0124-04
    as

    Download full text from publisher

    File URL: http://ec.europa.eu/economy_finance/publications/qr_euro_area/2013/pdf/qrea4_section_4_en.pdf
    Download Restriction: no

    More about this item

    Keywords

    corporate taxation; capital composition;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:euf:qreuro:0124-04. 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: (ECFIN INFO). General contact details of provider: http://edirc.repec.org/data/dg2ecbe.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.