Optimal Taxation with Capital Accumulation and Wage Bargaining This study examines optimal taxation in a unionized economy in which households save capital. The main findings are as follows. Judd’s (1985) and Chamley’s (1986) classical results of zero taxation on capital income holds. This is true independently of workers’ savings behaviour or the capitalists’ weight in the social welfare funct...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country’s government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of capital. Economic integration reduces the optimal capital subsidy and drives low-productivity firms from th...

According to the existing literature, capital taxes should not be imposed in the presence of optimal profit taxation in either unionised or competitive labour markets. We show that this conclusion does not hold for an economy with dual labour markets, where the competitive wage rate provides the outside option for unionised workers. Even with non-distortionary profit taxation it is optimal for ...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country’s government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of capital. Economic integration reduces the optimal capital subsidy and drives low-productivity firms from th...

In a discounted one-sector convex model of optimal economic growth where utility may depend on both consumption and capital stock, I derive necessary and sufficient conditions for sustained growth (unbounded expansion of capital and consumption). Conditions for bounded growth and extinction are also outlined. Optimal paths may be non-monotone. Sustained growth may occur even though the asymptot...

This paper examines optimal factor taxation when output is produced from labour and capital and some (or all) households save capital. It is shown that there is a reputational equilibrium in which the government has no incentive to change its announced tax policies. In this equilibrium, the Judd-Chamley assertion that the tax on capital income tends to zero in the limit holds. This is independe...

This paper explores the leverage determinants across firms’ sizesbased on the two main theories behind the capital structure, the trade-offand the pecking order theories. A panel data is sued to find therelationship between capital structure and the variables that proxy forbenefits and costs of debt during 1990 to 2006. Our findings show thatboth principles help to explain the capital structure...

Using a database of more than 8,000 companies from 35 countries, we find that the value of corporate diversification is related to the level of capital market development, integration, and legal systems. Among high-income countries, where capital markets are well developed and integrated, we find a significant diversification discount. By contrast, for the lower income and segmented countries, ...