Corporate taxation, incumbency advantage and entry

Elie Appelbaum and Eliakim Katz

Working Papers from York University, Department of Economics

Abstract: It is the purpose of this paper to show that corporation tax may affect industrial structure. Analyzing the effects of corporation tax, we demonstrate that it tends to favour incumbents over entrants. We further show that the effect of this advantage on an incumbent's output depends on his profit or loss history. An incumbent with a past profit is likely to produce a greater output, thereby partially or fully crowding out an entrant's output. In contrast, an incumbent with a past loss is more likely to produce a smaller output, making entry easier.

Keywords: Corporate taxation; Industrial structure; Incumbency advantage (search for similar items in EconPapers)
JEL-codes: H25 L22 (search for similar items in EconPapers)
Pages: 12 pages
Date: 1996
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:1996_12

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