Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform

Francois Gourio and Jianjun Miao

No wp2008-002, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

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.

Keywords: firm heterogeneity; finance regime; dividend tax reform; general equilibrium (search for similar items in EconPapers)
JEL-codes: E22 E62 G31 G35 H32 (search for similar items in EconPapers)
Pages: 49
Date: 2008-11
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Forthcoming, American Economic Journal: Macroeconomics

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Related works:
Journal Article: Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform (2010)
Working Paper: Firm Heterogeneity and the Long-run Effects of Dividend Tax Reform (2009)
Working Paper: Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform (2007)
Working Paper: Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform (2006)
Working Paper: Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform (2006)
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