To study the long-run effect of dividend taxation on aggregate capital
accumulation, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity
shocks. We find that a dividend tax cut raises aggregate productivity by reducing the frictions in the reallocation of capital across firms. Our baseline model simulations show that when both dividend and capital gains tax rates are cut from 25 and 20 percent, respectively, to the same 15 percent level permanently, the aggregate long-run capital stock increases by about 4 percent. (JEL D21, E22, E62, G32, G35, H25, H32)
Gourio, François, and Jianjun Miao.
"Firm Heterogeneity and the Long-Run Effects of Dividend Tax Reform."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Capital; Investment; Capacity
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Business Taxes and Subsidies including sales and value-added (VAT)
Fiscal Policies and Behavior of Economic Agents: Firm