A Welfare Analysis on Start-Up Decisions under Default Risk

Nicola Comincioli, Paolo Panteghini and Sergio Vergalli

No 9478, CESifo Working Paper Series from CESifo

Abstract: This short article studies the tax effects on a start-up investment decision under uncertainty. Since the representative firm can decide both when to invest and how much to borrow, the distortive effects are twofold. We thus show that the deadweight loss (namely, the ratio between the welfare loss and tax revenue) ranges from 25 to 32%, whereas mature firms face a lower distortion (as shown by Comincioli et al. (2021) the maximum deadweight loss is about 25%).

Keywords: real options; business taxation; default risk (search for similar items in EconPapers)
JEL-codes: G33 G38 H25 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-ore, nep-pbe, nep-pub and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9478

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