This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Journal: Economic Policy: Vol. 2 No. 3 (August 2010)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy Forthcoming Articles

Dividend and Corporate Taxation in an Agency Model of the Firm

Article Citation

Chetty, Raj, and Emmanuel Saez. 2010. "Dividend and Corporate Taxation in an Agency Model of the Firm." American Economic Journal: Economic Policy, 2(3): 1-31.

DOI: 10.1257/pol.2.3.1

Abstract

Recent evidence on the effect of dividend taxes on firm behavior is inconsistent with neoclassical theories of dividend and corporate taxation. We develop a simple agency model in which managers and shareholders have conflicting interests to explain the evidence. In this model, dividend taxation induces managers to undertake unproductive investments by retaining earnings, and creates a first-order deadweight cost. In contrast, corporate taxes do not distort the manager's payout decision and may only create second-order efficiency costs. Corporate income taxation may therefore be a more efficient way to generate revenue than dividend taxation, challenging existing intuitions based on neoclassical models. (JEL D21, G35, H25, H32)

Article Full-Text Access

Full-text Article

Authors

Chetty, Raj (Harvard U)
Saez, Emmanuel (U CA, Berkeley)

JEL Classifications

D21: Firm Behavior: Theory
G35: Payout Policy
H25: Business Taxes and Subsidies including sales and value-added (VAT)
H32: Fiscal Policies and Behavior of Economic Agents: Firm

Comments

View Comments on This Article (0) | Login to post a comment


American Economic Journal: Economic Policy


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us