Creator: Bergoeing, Raphael, Hernando, Andrés, and Repetto, Andrea Series: Advances in dynamic economics Abstract:
We estimate the effects of policy distortions on aggregate productivity. Based on a model of plant production and productivity uncertainty and heterogeneity, and using Chilean manufacturing data, we focus on the effect of taxation on the exit behavior of plants. We find that taxes do distort the liquidation decisions of firms, suggesting that policy distortions reduce the extent to which factors are reallocated towards the most productive plants. Our results have important consequences for growth and development, as policies that alter the measure of plants that operate in equilibrium change the short-run response of output to exogenous shocks and the long run level of aggregate TFP. In particular, we find that the amount of productivity lost due to excessive plant shutdowns are very large.
Keyword: Total factor productivity, Latin America, Exit behavior of firms, South America, Taxation policy, and Chile Subject (JEL): H25 - Taxation, subsidies and revenue - Business taxes and subsidies and E23 - Macroeconomics : Consumption, saving, production, employment, and investment - Production
Creator: Huffman, Gregory W. Series: Finance, fluctuations, and development Abstract:
In this paper a dynamic model is constructed in which labor and capital taxes are determined endogenously through majority voting. The wealth distribution of the economy is shown to influence the voting behavior, and hence the equilibrium levels of the tax rates, which in turn affect the future distribution of wealth. It is shown that the economy exhibits a unique dynamic behavior. Because of the endogenously determined taxes, the asset prices, wealth distribution, and the tax rates can display persistent fluctuations, and even limit cycles, in reaction to exogenous disturbances, or even due to initial conditions. It is also shown that "tax smoothing" does not necessarily appear to naturally arise in such a model, as the economy can display extreme fluctuations in the endogenously determined tax rates.
Keyword: Wealth distribution, Voting behavior, Asset prices, Policy formulation, Dynamic general equilibrium model, and Tax rates Subject (JEL): H25 - Taxation, subsidies and revenue - Business taxes and subsidies, D31 - Distribution - Personal income, wealth, and their distributions, H20 - Taxation, subsidies and revenue - General, and H24 - Taxation, subsidies and revenue - Personal income and other nonbusiness taxes and subsidies