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Investment, Consumption, and Hedging Under Incomplete Markets

Wang, Neng - 2014

, consumption/savings, and portfolio selection. For a lump-sum investment payoff and an agent with a sufficiently strong … precautionary savings motive, an increase in volatility can accelerate investment, contrary to the standard real options analysis …. When the agent can trade the market portfolio to partially hedge against investment risk, the systematic volatility is …

Persistent link: https://www.econbiz.de/10012751873

A Unified Theory of Tobin's Q, Corporate Investment, Financing, and Risk Management

Bolton, Patrick; Chen, Hui; Wang, Neng - 2022

This paper proposes a simple homogeneous dynamic model of investment and corporate risk management for a financially … investment and financing decisions. In our model, corporate risk management involves internal liquidity management, financial … hedging, and investment. We determine a firm's optimal cash, investment, asset sales, credit line, external equity finance …

Persistent link: https://www.econbiz.de/10014209333

Capital Income Taxes and the Benefit of Price Stability

Feldstein, Martin S. - 2000

Going from low inflation to price stability involves a short term loss (associated with the" higher unemployment rate required to reduce the inflation) and results in a series of welfare gains" in all future years. The primary source of these gains is the reduction in the distortions that...

Persistent link: https://www.econbiz.de/10014158369

Decomposing the Welfare Costs of Capital Tax Distortions : The Importance of Risk Assumptions

Hamilton, Bob; Mintz, Jack M.; Whalley, John - 2021

This paper analyzes the implications of alterative risk assumptions for estimates of the distorting effects of the corporate tax in Canada. These distortions are decomposed into three broad categories: inter-asset distortions; inter-industry distortions; and inter-temporal distortions. Estimates...

Persistent link: https://www.econbiz.de/10013225577

The Deadweight Loss from `Non-Neutral' Capital Income Taxation

Auerbach, Alan J. - 2021

This paper develops an overlapping generations general equilibrium growth model with an explicit characterization of the role of capital goods in the production process. The model is rich enough in structure to evaluate and measure simultaneously the different distortions associated with capital...

Persistent link: https://www.econbiz.de/10013228635

The Welfare Effects of a Capital Income Tax in an Open Economy

Hartman, David G. - 2021

International capital mobility has typically been ignored in discussions of the welfare effects of the capital income tax. In the a typical analysis which does consider the open economy it is recognized that highly-elastic capital flows could significantly alter the usual conclusions. While...

Persistent link: https://www.econbiz.de/10013236725

A Theory of Optimal Capital Taxation

Piketty, Thomas - 2012

This paper develops a realistic, tractable theoretical model that can be used to investigate socially-optimal capital taxation. We present a dynamic model of savings and bequests with heterogeneous random tastes for bequests to children and for wealth per se. We derive formulas for optimal tax...

Persistent link: https://www.econbiz.de/10013107763

Capital Income Taxes with Heterogeneous Discount Rates

Diamond, Peter A. - 2010

With heterogeneity in both skills and discount factors, the Atkinson-Stiglitz theorem that savings should not be taxed does not hold. We consider a model with heterogeneity of preferences at each earnings level. With some assumptions on the equilibrium, a small savings tax on high earners and a...

Persistent link: https://www.econbiz.de/10013152380

Trading with the Unborn : A New Perspective on Capital Income Taxation

Smetters, Kent A. - 2021

Security markets between generations are incomplete due to a biological trading constraint' that prevents living generations from negotiating contingent contracts with the unborn. This paper shows, however, that government policy can be used to replicate the trades that would have occurred if...

Persistent link: https://www.econbiz.de/10013212341

Revenue and Welfare Implications for a Capital Gains Tax Cut

Hendershott, Patric H.; Toder, Eric J.; Won, Yun Hi - 2022

This paper uses a general equilibrium model to simulate both the effects of a preferential capital-gains tax rate on total income tax revenues and the effects of a revenue-neutral substitution between a capital gains preference and marginal income tax rates on economic efficiency and the...

Persistent link: https://www.econbiz.de/10013292240