Template-Type: ReDIF-Paper 1.0
Author-Name: Matteo Ghilardi
Author-Name-First: Matteo
Author-Name-Last: Ghilardi
Author-Name: Roy Zilberman
Author-Name-First: Roy
Author-Name-Last: Zilberman
Title: Macroeconomic Effects of Dividend Taxation with Investment Credit Limits
Abstract: A dynamic general equilibrium model augmented for an occasionally-binding investment borrowing limit reconciles competing views on the macroeconomic effects of dividend taxation. Permanent tax reforms are distortionary in the credit-constrained long-run equilibrium but are neutral otherwise. Temporary tax cuts may be expansionary or contractionary in the short-term depending on their scale and on the firm's initial and interim credit position. Interactions between payout tax shocks and the financial constraint tightness produce state-contingent, non-linear, and asymmetrical macroeconomic dynamics. These findings are consistent with the varied responses in investment rates and asset prices observed in the data following historical dividend tax changes.
Creation-Date: 2023
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2023_005.pdf
File-Format: application/pdf
Number: 387012802
Classification-JEL: E22, E32, E44, E62, H25, H30, H32
Keywords: Dividend Taxation, Occasionally-Binding Borrowing Constraints, Investment, Tobin's q, Business Activity
Handle: RePEc:lan:wpaper:387012802