Essays on the real and financial allocation of capital
This dissertation consists of three papers studying how firms allocate real and financial capital, and how taxes, the labor market and asymmetric information affect these allocation decisions. The first paper studies the response of business investment to taxes. I use the variation provided by recent reforms to the Mexican tax system, including the elimination of accelerated depreciation for investment outside the main metropolitan areas. I show that investment is very sensitive to tax changes (an elasticity of investment with respect to the user cost around -2.0), mainly due to the small open economy nature of Mexico: large responses of multinationals and large elasticity of imported assets. I also show that investment behavior is consistent with nonconvexities and irreversibilities. The results are robust to different specifications and instrumental variables approaches, and are not an artifact of tax evasion. The second paper studies the link between payout and unionization. Signaling models suggest that dividends are used to convey information about future earnings to investors. However, if unions also receive these signals, managers will be less inclined to send the signal, preventing unions from using this information when bargaining for higher salaries.
Year of publication: |
2006-11-07
|
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Authors: | RamÃrez Verdugo, Arturo |
Other Persons: | James M. Poterba. (contributor) |
Institutions: | Massachusetts Institute of Technology. Dept. of Economics. (contributor) |
Publisher: |
Massachusetts Institute of Technology |
Saved in:
freely available
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