Internal debt and welfare
This paper analyzes how multinational firms' internal debt financing affects high‐tax countries. It uses a dynamic small open economy model and takes into account that internal debt impacts both the multinational firms' investment decisions and the government's tax policy. The government has incentives to redistribute income from firm owners to workers. If the government's redistributive motive is not too strong, internal debt reduces welfare in the short term by decreasing tax revenues. However, debt financing stimulates capital accumulation and exerts a positive long‐term welfare impact.
Year of publication: |
2022
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Authors: | Kalamov, Zarko Y. |
Published in: |
Journal of Public Economic Theory. - Hoboken, NJ : Wiley, ISSN 1467-9779. - Vol. 25.2022, 1, p. 196-224
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Publisher: |
Hoboken, NJ : Wiley |
Saved in:
freely available
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