2017-03-01
Capital taxation and imperfect competition: ACE vs. CBIT
Publication
Publication
Journal of Public Economics , Volume 147 p. 1- 15
his paper compares the Comprehensive Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE) under imperfect competition using an oligopoly Salop model and a monopolistic competition model. A key insight is that the effect of a switch to either tax system depends on technology and the intensity of competition. Both tax systems are distortionary when entry is endogenous. Using the Salop model, we show that ACE (CBIT) tends to improve welfare in decreasing returns (increasing returns) to scale industries, whereas the two regimes are welfare neutral in constant returns to scale industries.
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| doi.org/10.1016/j.jpubeco.2016.12.010, hdl.handle.net/1765/122057 | |
| Journal of Public Economics | |
| Organisation | Erasmus School of Economics |
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Brekke, K.R., Pires, A.J.G., Schindler, D.S., & Schjelderup, G. (2017). Capital taxation and imperfect competition: ACE vs. CBIT. Journal of Public Economics, 147, 1–15. doi:10.1016/j.jpubeco.2016.12.010 |
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