Optimal Capital Taxation in an Economy with Innovation-Driven Growth
Ping-Ho Chen (),
Angus Chu,
Hsun Chu and
Ching-chong Lai
MPRA Paper from University Library of Munich, Germany
Abstract:
This paper investigates optimal capital taxation in an innovation-driven growth model. We examine how the optimal capital tax rate varies with externalities associated with R&D and innovation. Our results show that the optimal capital tax rate is higher when (i) the "stepping on toes effect" is smaller, (ii) the "standing on shoulders effect" is stronger, or (iii) the extent of creative destruction is greater. Moreover, the optimal capital tax rate and the monopolistic markup exhibit an inverted-U relationship. By calibrating our model to the US economy, we find that the optimal capital tax rate is positive, at a rate of around 11.9 percent. We also find that a positive optimal capital tax rate is more likely to be the case when there is underinvestment in R&D.
Keywords: Optimal capital taxation; R&D externalities; innovation (search for similar items in EconPapers)
JEL-codes: E62 O31 O41 (search for similar items in EconPapers)
Date: 2019-02, Revised 2020-06
New Economics Papers: this item is included in nep-acc, nep-cse, nep-gro, nep-mac, nep-pbe and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/101228/1/MPRA_paper_101228.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/107961/1/MPRA_paper_107961.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/110189/1/MPRA_paper_110189.pdf revised version (application/pdf)
Related works:
Journal Article: Optimal capital taxation in an economy with innovation-driven growth (2023) 
Working Paper: Optimal Capital Taxation in an Economy with Innovation-Driven Growth (2019) 
Working Paper: Optimal Capital Taxation in an Economy with Innovation-Driven Growth (2019) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101228
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().