Capital Taxation and Economic Performance
SFB International Tax Coordination Discussion Paper No. 24
14 Pages Posted: 27 May 2008
Date Written: July 17, 2007
Abstract
A new technology is a bold new combination of production factors that potentially yields a higher level of total factor productivity. The optimal combination of input factors is unknown when an innovation is pursued. A larger targeted innovation may require a greater change in the optimal combination of production factors employed and increases volatility alongside with economic growth. We show that economic policy can interfere in this relationship with by adjusting source based capital income taxes.
Keywords: Economic Growth, Cycles, Innovation, Capital Taxation, Tax Coordination, Automatic Stabilizers
JEL Classification: H87, E32, O31, O41
Suggested Citation: Suggested Citation
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