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Capital Taxation During the U.S. Great Depression

  • Ellen R. McGrattan

Previous studies of the U.S. Great Depression find that increased government spending and taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax. The contribution is much greater when the analysis includes other types of capital taxes. A general equilibrium model extended to include taxes on dividends, property, capital stock, excess profits, and undistributed profits predicts patterns of output, investment, and hours worked that are more like those in the 1930s than found in earlier studies. The greatest effects come from the increased taxes on corporate dividends and undistributed profits. JEL Codes: E13, E32, H25 Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/qje/qjs022
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Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

Volume (Year): 127 (2012)
Issue (Month): 3 ()
Pages: 1515-1550

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Handle: RePEc:oup:qjecon:v:127:y:2012:i:3:p:1515-1550
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  1. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
  2. Raj Chetty & Emmanuel Saez, 2004. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," NBER Working Papers 10841, National Bureau of Economic Research, Inc.
  3. Harold L. Cole & Lee E. Ohanian, 1999. "The Great Depression in the United States from a neoclassical perspective," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-24.
  4. Timothy Kehoe & Edward Prescott, 2002. "Data Appendix to Great Depressions of the Twentieth Century," Technical Appendices kehoe02, Review of Economic Dynamics.
  5. Timothy J. Kehoe & Edward C. Prescott (), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.
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