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- Publisher Website: 10.1016/j.econmod.2010.09.020
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Article: Progressive taxation and the intensity and timing of investment
Title | Progressive taxation and the intensity and timing of investment |
---|---|
Authors | |
Keywords | Investment Intensity Investment Timing Progressive Taxation Real Options |
Issue Date | 2011 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecmod |
Citation | Economic Modelling, 2011, v. 28 n. 1-2, p. 100-108 How to Cite? |
Abstract | This paper examines the effect of progressive taxation on a firm's investment intensity and timing decisions using a real options approach. The firm possesses a perpetual option to invest in a project at any instant by incurring an irreversible investment cost at that time. The amount of the irreversible investment cost determines the intensity of investment that augments the value of the project. Tax progression is specified in a particular case of a constant marginal tax rate with an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. We show that the firm's investment decisions are neutral to tax progression only when the exogenously given tax exemption threshold is sufficiently large. When tax neutrality does not hold, we show that progressive taxation has a perverse effect on investment intensity. Finally, we show that progressive taxation induces the firm to invest earlier as compared to the case under proportional taxation (i.e., in the absence of any tax exemption). © 2010 Elsevier B.V. |
Persistent Identifier | http://hdl.handle.net/10722/177784 |
ISSN | 2023 Impact Factor: 4.2 2023 SCImago Journal Rankings: 1.335 |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Wong, KP | en_US |
dc.date.accessioned | 2012-12-19T09:39:53Z | - |
dc.date.available | 2012-12-19T09:39:53Z | - |
dc.date.issued | 2011 | en_US |
dc.identifier.citation | Economic Modelling, 2011, v. 28 n. 1-2, p. 100-108 | en_US |
dc.identifier.issn | 0264-9993 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177784 | - |
dc.description.abstract | This paper examines the effect of progressive taxation on a firm's investment intensity and timing decisions using a real options approach. The firm possesses a perpetual option to invest in a project at any instant by incurring an irreversible investment cost at that time. The amount of the irreversible investment cost determines the intensity of investment that augments the value of the project. Tax progression is specified in a particular case of a constant marginal tax rate with an exogenously given tax exemption threshold that makes the average tax rate increase with the tax base. We show that the firm's investment decisions are neutral to tax progression only when the exogenously given tax exemption threshold is sufficiently large. When tax neutrality does not hold, we show that progressive taxation has a perverse effect on investment intensity. Finally, we show that progressive taxation induces the firm to invest earlier as compared to the case under proportional taxation (i.e., in the absence of any tax exemption). © 2010 Elsevier B.V. | en_US |
dc.language | eng | en_US |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecmod | en_US |
dc.relation.ispartof | Economic Modelling | en_US |
dc.subject | Investment Intensity | en_US |
dc.subject | Investment Timing | en_US |
dc.subject | Progressive Taxation | en_US |
dc.subject | Real Options | en_US |
dc.title | Progressive taxation and the intensity and timing of investment | en_US |
dc.type | Article | en_US |
dc.identifier.email | Wong, KP: kpwongc@hkucc.hku.hk | en_US |
dc.identifier.authority | Wong, KP=rp01112 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1016/j.econmod.2010.09.020 | en_US |
dc.identifier.scopus | eid_2-s2.0-78650243694 | en_US |
dc.identifier.hkuros | 183891 | - |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-78650243694&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 28 | en_US |
dc.identifier.issue | 1-2 | en_US |
dc.identifier.spage | 100 | en_US |
dc.identifier.epage | 108 | en_US |
dc.identifier.isi | WOS:000286688900012 | - |
dc.publisher.place | Netherlands | en_US |
dc.identifier.scopusauthorid | Wong, KP=7404759417 | en_US |
dc.identifier.citeulike | 8230437 | - |
dc.identifier.issnl | 0264-9993 | - |