U.S. Tax Policy, Intrafirm Transfers, and the Allocative Efficiency of Transnational Corporations

Marion B Stewart

Public Finance = Finances publiques, 1986, vol. 41, issue 3, 350-71

Abstract: The "strong Laffer hypothesis" holds that current tax rates are so high that reducing them will increase tax revenue; the "generalized Laffer hypothesis" holds that current tax rates are so high that reducing them will increase social welfare. These hypotheses are investigated using an explicit-function model incorporating a Cobb-Douglas production function, constant elasticity factor-supply functions, and a single "aggregate average tax rate." Innovations in the analysis include adding the capital-supply consideration, allowing for the possibility of negative factor-supply elasticities, and including a parameter representing the current social-welfare value of public versus private spending.

Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:41:y:1986:i:3:p:350-71

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