Profit Taxation, Innovation and the Financing of Heterogenous Firms
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versione breve
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Credit constraints are more frequent among growth companies with
large investment opportunities. For the same reason, profit taxes
may harm innovative firms more than standard ones. This paper
develops a model of heterogeneous firms where an endogenous share
opts for innovation and faces credit constraints in the subsequent
expansion phase. We emphasize four results: (i) R&D subsidies
not only encourage innovation but also relax finance constraints and
help innovative firms to exploit investment opportunities to a
larger extent. (ii) Taxes which are neutral in a neoclassical world,
still restrict expansion investment of constrained firms by reducing
free cash-flow and thereby discourage innovation. (iii) A revenue
neutral increase in profit taxes to finance larger R&D subsidies
redistributes towards innovative firms and boosts aggregate
productivity and welfare. (iv) A revenue neutral tax cut cum base
broadening policy similarly boosts innovation and welfare
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tipo
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discussion paper (English)
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parole chiave
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Profit taxes, R&D subsidies, innovation, investment, credit constraints
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data di apparenza
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11-3-2011
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pagine
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1-35
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review
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not review
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citation
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Keuschnigg, C., & Ribi, E. (2011). Profit Taxation, Innovation and
the Financing of Heterogenous Firms.
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