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Subsidization Of Risky Investment Under Income Taxation And Moral Hazard

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  • VIDAR CHRISTIANSEN

Abstract

A simplified version of an analysis by Mayshar (1977) is established in order to expose and explain the key factor behind the case for subsidizing private risky investment. A critical evaluation of the analysis motivates an extension of the model to incorporate moral hazard. It is demonstrated that the main conclusion of the former analysis carries over to the revised model under reasonable assumptions.

Suggested Citation

  • Vidar Christiansen, 1990. "Subsidization Of Risky Investment Under Income Taxation And Moral Hazard," The Warwick Economics Research Paper Series (TWERPS) 357, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:357
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1989-1994/twerp357.pdf
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    References listed on IDEAS

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    1. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    2. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
    3. Jennifer F. Reinganum, 1981. "Market Structure and the Diffusion of New Technology," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 618-624, Autumn.
    4. Ireland, N & Stoneman, P, 1986. "Technological Diffusion, Expectations and Welfare," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 283-304, July.
    5. Joe A. Dodson, Jr. & Eitan Muller, 1978. "Models of New Product Diffusion Through Advertising and Word-of-Mouth," Management Science, INFORMS, vol. 24(15), pages 1568-1578, November.
    6. Williams, Ross A, 1972. "Growth in Ownership of Consumer Durables in the United Kingdom," Economica, London School of Economics and Political Science, vol. 39(153), pages 60-69, February.
    7. Davies, Stephen W., 1979. "Inter-firm diffusion of process innovations," European Economic Review, Elsevier, vol. 12(4), pages 299-317, October.
    8. Hannan, Timothy H & McDowell, John M, 1987. "Rival Precedence and the Dynamics of Technology Adoption: An Empirical Analysis," Economica, London School of Economics and Political Science, vol. 54(214), pages 155-171, May.
    9. Bonus, Holger, 1973. "Quasi-Engel Curves, Diffusion, and the Ownership of Major Consumer Durables," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 655-677, May-June.
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    Cited by:

    1. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 259-280, July.

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    Keywords

    technology diffusion ; survival analysis ; CNC;

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