Corporate tax, firm destruction and capital stock accumulation: Evidence from Chilean plants

Rodrigo Cerda and Diego Rodrigo Cerda; Diego Saravia.
Authors registered in the RePEc Author Service: Diego Saravia ()

No 364, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: We investigate the impact of corporate taxation on capital stock. In the paper, we indicate that corporate taxation might not only distort the decision of each firm to invest but could also destroy firms. With this in mind, we estimate capital demand equations, correcting for self-selection in the decision to produce by using the Heckman-Lee method and its panel data counterpart (Kyriadizou method). We use Chilean plant-level data , which is a period with large variability in corporate taxation. We find that corporate taxation has a considerable impact on the creation-destruction of firms and in addition, it also has an important impact on the decision of how much to invest for firms that are already involved in production.

Keywords: Corporate taxation; capital stock (search for similar items in EconPapers)
JEL-codes: D92 H25 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-lam
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:364

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