Could higher taxes increase the long-run demand for capital? Theory and evidence for Chile
Author
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Bustos, Alvaro
Author
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Engel Goetz, Eduardo
Author
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Galetovic Potsch, Alexander
Admission date
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2018-08-08T20:02:48Z
Available date
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2018-08-08T20:02:48Z
Publication date
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2004
Cita de ítem
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Journal of Development Economics Vol. 73, pp. 675 - 697, 2004
es_ES
Identifier
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0304-3878
Identifier
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https://doi.org/10.1016/j.jdeveco.2003.06.002
Identifier
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https://repositorio.uchile.cl/handle/2250/150766
Abstract
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On theoretical grounds alone, there is no a priori reason why higher taxes should reduce the desired capital stock, since a tax increase reduces marginal returns but also increases depreciation and interest payment allowances. Using a panel of Chilean corporations, this paper estimates a long-run demand for capital valid for a general adjustment-cost structure. Changes in the corporate tax rate are found to have no effect on the long-run demand for capital. Furthermore, when making investment decisions, firms ignore the marginal rates paid by their stockholders, suggesting the presence of a corporate veil.