Asymmetric Taxation and Performance-Based Incentive Contracts
This paper analyzes the effects of symmetric and asymmetric taxation on performance-based versus fixed remuneration contracts. I integrate a proportional corporation tax and a proportional wage tax into a binary principal-agent model. The wage tax increases the remuneration costs and makes the agent's employment less attractive. Thus, the principal tends to demand lower rather than higher effort or does not offer a contract at all. In contrast to the wage tax, the corporate tax is irrelevant for the optimal remuneration contract. Under asymmetric corporate taxation, the principal tends to offer contracts less frequently. Fixed remuneration contracts are penalized more heavily by asymmetric taxation than performance-based remuneration contracts.
|Date of creation:||2011|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eeckhoudt, Louis & Hansen, Pierre, 1982. "Uncertainty and the partial loss offset provision," Economics Letters, Elsevier, vol. 9(1), pages 31-35.
- Paolo Panteghini, 2001.
"Corporate Tax Asymmetries under Investment Irreversibility,"
CESifo Working Paper Series
548, CESifo Group Munich.
- Paolo M. Panteghini, 2001. "Corporate Tax Asymmetries under Investment Irreversibility," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 207-207, July.
- Brunello, Giorgio & Comi, Simona & Sonedda, Daniela, 2006. "Income Taxes and the Composition of Pay," IZA Discussion Papers 2203, Institute for the Study of Labor (IZA).
- Banerjee, Anindya & Besley, Timothy, 1990. "Moral Hazard, Limited Liability and Taxation: A Principal-Agent Model," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 46-60, January.
- Paolo Panteghini, 2001.
"On Corporate Tax Asymmetries and Neutrality,"
German Economic Review,
Verein für Socialpolitik, vol. 2(3), pages 269-286, 08.
- van Wijnbergen, Sweder & Estache, Antonio, 1999.
"Evaluating the minimum asset tax on corporations: an option pricing approach,"
Journal of Public Economics,
Elsevier, vol. 71(1), pages 75-96, January.
- Estache, Antonio & van Wijnbergen, Sweder, 1992. "Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach," CEPR Discussion Papers 684, C.E.P.R. Discussion Papers.
- Antonio Estache & Sweder van Wijnbergen, 1999. "Evaluating the minimum asset tax on corporations: an option pricing approach?," ULB Institutional Repository 2013/13378, ULB -- Universite Libre de Bruxelles.
- Antonio Estache & Sweder van Wijnbergen, 1999. "Evaluating the Minimum Asset Tax on Corporations: An Option Pricing Approach'," ULB Institutional Repository 2013/44003, ULB -- Universite Libre de Bruxelles.
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001.
"An Introduction to the Economics of Information: Incentives and Contracts,"
Oxford University Press,
edition 2, number 9780199243273, December.
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259, December.
- Kanniainen, Vesa, 2000. "Empire building by corporate managers:: the corporation as a savings instrument," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 127-142, January.
- Christelle Viauroux & Barnali Gupta, 2009. "Is Tax sharing Optimal? An Analysis in a Principal-Agent Framework," UMBC Economics Department Working Papers 09-105, UMBC Department of Economics.
- Vesa Kanniainen, 1999. "Failures in Corporate Governance: Can the Corporation Tax Improve Efficiency?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(3/4), pages 310-310, July.
- Mackie-Mason, Jeffrey K., 1990. "Some nonlinear tax effects on asset values and investment decisions under uncertainty," Journal of Public Economics, Elsevier, vol. 42(3), pages 301-327, August.
- Ahsan, Syed M, 1974. "Progression and Risk-Taking," Oxford Economic Papers, Oxford University Press, vol. 26(3), pages 318-328, November.
- Ralf Ewert & Rainer Niemann, 2010. "Limited Liability, Asymmetric Taxation, and Risk Taking - Why Partial Tax Neutralities can be Harmful," CESifo Working Paper Series 3301, CESifo Group Munich.
- Saman Majd & Stewart C. Myers, 1986. "Tax Asymmetries and Corporate Income Tax Reform," NBER Working Papers 1924, National Bureau of Economic Research, Inc.
- Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series 1219, CESifo Group Munich.
- Eeckhoudt, Louis & Gollier, Christian & Schlesinger, Harris, 1997.
"The no-loss offset provision and the attitude towards risk of a risk-neutral firm,"
Journal of Public Economics,
Elsevier, vol. 65(2), pages 207-217, August.
- Eeckhoudt, L. & Gollier, C. & Schlesinger, H., 1996. "The No Loss Offset Provision and the Attitude Towards Risk of a Risk-Neutral Firm," Papers 96.409, Toulouse - GREMAQ.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3363. 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: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.