A note on corporate taxation, limited liability, and asymmetric information

Anton Miglo

No 704, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: Becker and Fuest (forthcoming) provides a new explanation for the important and puzzling link between limited liability and corporate taxation. The authors argue that a corporate tax on all entrepreneurs with limited liability is optimal when entrepreneurs can offset potential losses and when asymmetric information exists regarding projects qualities. This note considers a model with slightly modified production technology. It confirms that entrepreneurs' abilities to offset losses and the existence of asymmetric information may affect government policy. However, it also shows that the optimal taxation policy differs from that in Becker and Fuest (forthcoming).

Pages: 9 pages
Date: 2007
New Economics Papers: this item is included in nep-bec, nep-ppm and nep-pub
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Citations: View citations in EconPapers (2)

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Journal Article: A note on corporate taxation, limited liability, and asymmetric information (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:gue:guelph:2007-4

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