Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform
American Economic Journal: Macroeconomics
vol. 2,
no. 1, January 2010
(pp. 131-68)
Abstract
To study the long-run effect of dividend taxation on aggregate capital accumulation, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We find that a dividend tax cut raises aggregate productivity by reducing the frictions in the reallocation of capital across firms. Our baseline model simulations show that when both dividend and capital gains tax rates are cut from 25 and 20 percent, respectively, to the same 15 percent level permanently, the aggregate long-run capital stock increases by about 4 percent. (JEL D21, E22, E62, G32, G35, H25, H32)Citation
Gourio, François, and Jianjun Miao. 2010. "Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform." American Economic Journal: Macroeconomics, 2 (1): 131-68. DOI: 10.1257/mac.2.1.131Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- E22 Capital; Investment; Capacity
- E62 Fiscal Policy
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
- G35 Payout Policy
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H32 Fiscal Policies and Behavior of Economic Agents: Firm
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