Without financing frictions, profit taxes reduce investment by their effect on the user cost of capital. With financing constraints, investment becomes sensitive to cash-flow. In this situation, even small taxes impose first order welfare losses, and ACE and cash-flow tax systems are no longer...

This paper proposes a growth oriented dual income tax by combining an allowance for corporate equity with a broadly defined flat tax on personal capital income. Revenue losses are compensated by an increase in the value added tax. The paper demonstrates the neutrality properties of the reform...

The paper proposes an intertemporal equilibrium model that highlights the interdependence between aggregate investment and the degree of product differentiation with free entry of monopolistic producers. An investment externality is identified that results in underaccumulation of capital in the...

This paper proposes a simple partial equilibrium model to investigate the effects of government policy on venture capital backed investments. Giving up an alternative career, entrepreneurs focus their effort on a single, high risk venture each. Venture capitalists acquire an equity stake and...

In recent years, venture capital has increasingly become a factor in the financing of new firms. We examine how the value of mature firms determines the incentives of entrepreneurs to start up new firms and of venture capitalists to finance and advise them. We examine how capital gains taxes as...