Macroeconomic Effects of Dividend Taxation with Investment Credit Limits

Matteo Ghilardi and Roy Zilberman

No 359000594, Working Papers from Lancaster University Management School, Economics Department

Abstract: We analyze the effects of dividend taxation in a general equilibrium business cycle model with an occasionally-binding investment credit limit. Permanent dividend tax reforms distort capital investment decisions in the binding long-run equilibrium, but are neutral otherwise. Temporary unexpected tax cuts stimulate short-term real activity in the credit-constrained economy, yet produce contractionary macroeconomic outcomes in the slack regime. The occasionally-binding constraint reconciles the `traditional' and `new' views of dividend taxation, and highlights the importance of measuring the firm's initial borrowing position before enacting tax reforms. Finally, permanently lower dividend taxes dampen financial business cycles, and help to explain macroeconomic asymmetries.

Keywords: Dividend Taxation; Occasionally-Binding Borrowing Constraints; Investment; Business Cycles (search for similar items in EconPapers)
JEL-codes: E22 E44 E62 H24 H25 H32 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Macroeconomic Effects of Dividend Taxation with Investment Credit Limits (2024)
Working Paper: Macroeconomic Effects of Dividend Taxation with Investment Credit Limits (2023)
Working Paper: Macroeconomic Effects of Dividend Taxation with Investment Credit Limits (2022)
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:lan:wpaper:359000594

Access Statistics for this paper

More papers in Working Papers from Lancaster University Management School, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Motta ().