Publications [#285764] of Pietro F. Peretto

Journal Articles

1. Peretto, PF, Corporate taxes, growth and welfare in a Schumpeterian economy, Journal of Economic Theory, vol. 137 no. 1 (November, 2007), pp. 353-382, Elsevier BV, ISSN 0022-0531 [repository], [doi]
   (last updated on 2024/04/18)

   Abstract:
   I take a new look at the long-run implications of taxation through the lens of modern Schumpeterian growth theory. I focus on the latest vintage of models that sterilize the scale effect through a process of product proliferation that fragments the aggregate market into submarkets whose size does not increase with the size of the workforce. I show that the following interventions raise welfare: (a) granting full expensibility of R&D to incorporated firms; (b) eliminating the corporate income tax and/or the capital gains tax; (c) reducing taxes on labor and/or consumption. What makes these results remarkable is that in all three cases the endogenous increase in the tax on dividends necessary to balance the budget has a positive effect on growth. A general implication of my analysis is that corporate taxation plays a special role in Schumpeterian economies and provides novel insights on how to design welfare-enhancing tax reforms. © 2007 Elsevier Inc. All rights reserved.