The Dynamic Effects of Corporate Tax Policy in Oligopolies
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Series
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Speaker(s)Thomas Gresik (University of Notre Dame, United States)
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FieldOrganizations and Markets, Macroeconomics
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LocationErasmus University Rotterdam, Campus Woudestein, Polak 3-18
Rotterdam -
Date and time
October 16, 2023
11:30 - 12:30
Abstract
We model capital investment in an oligopoly as an infinite-horizon dynamic game and analyze the short-run and long-run economic effects of a country’s corporate tax policy. In an industry with a low rate of capital depreciation (or product turnover), an increase in the tax deductibility of a firm’s capital investments, as reflected in a shift from income taxation to cash flow taxation,
decreases market concentration and increases consumer surplus at the cost of large tax subsidies. However, in industries with a high rate of depreciation, the shift increases consumer surplus and tax revenues at the cost of higher market concentration. Joint paper with Giorgi Piriashvili.