Irreversible Capital Accumulation and Nonlinear Tax Policy: A Note

Luis Alvarez and Erkki Koskela

FinanzArchiv: Public Finance Analysis, 2007, vol. 63, issue 1, 46-53

Abstract: We analyze the influence of tax progression on optimal investment policy and its value. We show that three possible optimal regimes arise, depending on thenature of the tax policy. If the exogenously given progression threshold lies between the optimal capital stocks in the case of higher and lower marginal profit taxes, then the optimal investment policy is independent of profit tax rates. But outside this corner solution, the optimal investment policy is conventional.

Keywords: optimal investment; nonlinear tax policy (search for similar items in EconPapers)
JEL-codes: E22 H25 H32 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(200703)63:1_46:icaant_2.0.tx_2-3

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DOI: 10.1628/001522107X186719

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