[PDF] Essays On Corporate Taxation And The Firm eBook

Author : Pierre-Pascal Gendron
Publisher :
Page : 0 pages
File Size : 34,84 MB
Release : 1997
Category :
ISBN :

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Three essays treat various issues in understanding and evaluating firm behaviour in response to taxation. Essay I analyzes capital taxation in a dominant firm model. Essay II analyzes corporate tax refunds in an oligopolistic supergame model. Essay III analyzes the impact of tax asymmetries on investment decisions in a neoclassical model. Essay I proposes a two-stage dominant firm model which allows for cost-reducing investment by the dominant firm prior to quantity competition. Market structure is endogenous, and accommodated and impeded entry equilibria with and without underinvestment are characterized. Tax effects are generally consistent with economic theory but special cases arise: for example, (i) small tax changes alter market structure through entry or exit; (ii) some tax changes have no impacts on market variables; and (iii) a subsidy to non-producing fringe is welfare-improving. The analysis emphasizes the importance of market discontinuities. Essay II proposes a particular collusive equilibrium in a repeated oligopoly model with homogeneous quantity-setting firms. The industry sustains tacit collusion by using credible and severe punishments of deviations. The paper focuses on the impact of changing the refundability of tax losses. The analysis of the most collusive equilibrium with losses indicates that a tax policy which increases refundability reduces industry output, increases market price, and therefore strengthens tacit collusion. In addition, the policy increases government revenue and reduces social welfare. Essay III develops theoretical expressions for the user cost of capital in the presence of tax asymmetries. An empirical model is developed to estimate the probability of a given tax status on the basis of firm characteristics. A structural switching regression model of the firm's demand for capital goods is developed next. This model uses estimated probabilities as inputs and is utilized to investigate the potential endogeneity of the cost of capital using a balanced panel of Canadian companies. Results suggest that tax status affects the firms' capital acquisition behaviour.

Author : Md Rafi Hossain
Publisher :
Page : 110 pages
File Size : 20,80 MB
Release : 2019
Category : Economics
ISBN : 9781085590815

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My dissertation comprises of three essays in the field of public economics. The first essay investigates the employment effects of corporate taxation at the industry level; Specifically, do corporate taxes affect employment rates at the industry level and are the effects consistent across industries? This paper uses an identification strategy that exploits variation in corporate income tax rates across U.S. states and tries to understand how they impact industry employment at the county level with contiguous counties straddling state borders acting as controls. The results show that any change in the corporate tax rate affect the employment rate in goods producing sectors, but employment rate within the service sectors is only affected by an increase, and not decreases, in the corporate tax rates.The second essay is the first of its kind using the same variation in state corporate tax rates to investigate if they have any explanatory power in predicting variations in CEO pay. Specifically, this paper allows us to shed light on whether corporate tax cuts boost CEO pay? This paper, by using a difference-in-difference (DID) set up over the period 1994 to 2015, finds that corporate tax cuts statistically affect CEO pay among all publicly traded firms in the U.S. The magnitude of the effect increases among the S&P 500, S&P 100 and some tax avoiding firms. The paper further presents some interesting findings using three different measures of executive compensation.Lastly, the third essay empirically investigates whether the variation in state corporate tax rates across the US economy has any explanatory power in predicting variations in research and development expenditure across firms. The paper uses an identification strategy that exploits variation in corporate income tax rates across U.S. states and tries to understand how it impacts firm level R&D activity by using a difference-in-difference set up. Compustat data for all U.S. firms over the period starting from 1994 to 2014 are used to test this hypothesis. The results suggest that corporate tax cuts does not affect R&D expenditures among all publicly traded firms in the U.S. while an increase in the tax rate leads to a decrease in R&D spending.