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Inflation, Tax Rules, and the Long-term Interest Rate

In: Inflation, Tax Rules, and Capital Formation

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  • Martin Feldstein
  • Lawrence Summers

Abstract

Although the return to capital is a focus of research in both macroeconomics and public finance, each specialty has approached this subject with an almost total disregard for the other's contribution. Macroeconomic studies of the effect of inflation on the rate of interest have implicitly ignored the existence of taxes and the problems of tax depreciation. Similarly, empirical studies of the incidence of corporate tax changes have not recognized that the effect of the tax depends on the rate of inflation and have ignored the information on the rate of return that investors receive in financial markets. Our primary purpose in this paper is to begin to build a bridge between these two approaches to a common empirical problem.
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Suggested Citation

  • Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 153-185 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:11334
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    References listed on IDEAS

    as
    1. Aaron, Henry J, 1976. "Inflation and the Income Tax," American Economic Review, American Economic Association, pages 193-199.
    2. Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 153-185 National Bureau of Economic Research, Inc.
    3. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, pages 1-22.
    4. Martin Feldstein & Jerry Green & Eytan Sheshinski, 1983. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 44-60 National Bureau of Economic Research, Inc.
    5. Martin Feldstein, 1983. "Fiscal Policies, Inflation, and Capital Formation," NBER Chapters,in: Inflation, Tax Rules, and Capital Formation, pages 61-80 National Bureau of Economic Research, Inc.
    6. Auerbach, Alan J., 1979. "Share valuation and corporate equity policy," Journal of Public Economics, Elsevier, pages 291-305.
    7. Lawrence H. Summers, 1978. "Tax Policy in a Life Cycle Model," NBER Working Papers 0302, National Bureau of Economic Research, Inc.
    8. Michael C. Lovell, 1978. "The Profit Picture: Trends and Cycles," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 769-789.
    9. Auerbach, Alan J., 1979. "Share valuation and corporate equity policy," Journal of Public Economics, Elsevier, pages 291-305.
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