Luis Alvarez JR
, Vesa Kanniainen
and Jan Södersten
Luis Alvarez JR: Institute of Applied Mathematics, Postal: University of Turku, FIN-20014 Turku, Finland
Vesa Kanniainen: University of Helsinki, Postal: Department of Economics, P.O. Box 54, FIN-00014 University of Helsinki, Finland
Jan Södersten: Department of Economics, Postal: Uppsala University, Box 513, SE-751 20 Uppsala, Sweden
Abstract: The paper shows that a corporate tax policy which is thought to be neutral may have significant incentive effects. This result is established in a model with tax advantage to debt and expectations about a forthcoming tax reform. Investment spurt effects are established and compared to those of a firm with equity finance. A tax-cut cum base-broadening tax reform which leaves the long-run investment incentives of an all-equity firm unaffected is shown to cause a substantial short run investment hike. The findings are illustrated by numerical simulations indicating the magnitudes of the spurt effects.
23 pages, February 15, 2000
Full text files
Questions (including download problems) about the papers in this series should be directed to Lovisa Isaksson ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2019-01-15 07:35:13.