Narrow Results

Capital usually leads to income and income is more accurately and easily measured. Thus, we summarize income distributions in USA, Germany, etc.

Recent analysis of a Yard–Sale (YS) exchange model supplemented with redistributive proportional taxation suggested an asymptotic behavior $P(w)\sim 1∕w^{\mu }$ for the wealth distribution, with a parameter-dependent exponent $\mu$. Revisiting this problem, it is here shown analytically, and confirmed by extensive numerical simulation, that the asymptotic behavior of $P(w)$ is not power-law but rather a Gaussian. When taxation is weak, we furthermore show that a restricted-range power-law behavior appears for wealths around the mean value. The corresponding power-law exponent equals 3/2 when the return distribution has zero mean.

Previous papers on the transfer problem pay scant attention to the problems caused by the distortionary taxation that extracts the gift from the donor nation or the cut in distortionary taxation that bestows the gift to the recipient nation. When combined with inflexibility in the real wage these changes in taxation and the transfer itself impose a considerable burden to the donor matched by a considerable blessing to the recipient. We explore these effects, and conclude that “The Great Rebalancing” between the US and China needed to cure the US trade deficit, i.e., to eliminate the transfer that China is making to the US may bestow a big burden on the US matched by a big blessing for China.

We study the effect of change in the organizational structure from a corporation to a real estate investment trust (REIT) on the firm value. Changing the organizational structure from a corporation to a REIT could result in an increase in the firm value, and some companies may be motivated to change their organizational structure because of this. We examine three possible sources of gains in the firm value from such a change in the organizational structure. They are the potential tax savings, reduction in agency costs of managerial discretion, and increase in the price multiples after the conversion. We examine the changes in the firm value of firms that announce conversion to a REIT during 1990–2016. We find that the announcement period returns are positive and strongly significant. Consistent with the tax hypothesis, the announcement period returns are positively related to the effective tax rate of the sample firms. Consistent with the managerial discretion hypothesis, the announcement period returns are positively related to the level of free cash flow of low growth firms. Consistent with the mis-valuation hypothesis, the announcement period returns are higher when REIT valuations are higher relative to the sample firms.

This paper examines whether stock option exercise behavior is consistent with the incentives provided by the US Internal Revenue Code using data provided by a large multinational corporation which made multiple broad-based and management grants over the period of examination. In particular we examine whether holders delay exercising their options to transfer income from one year to the next, hence deferring the tax payments associated with the option gains. We document that taxpayers rationally delay the exercise of taxable nonqualified options around the end of the year, consistent with the incentive to delay tax payments. In contrast we do not find this pattern with respect to the exercise of qualified stock options, upon which taxes may be indefinitely deferred.

In this paper, we present a model that demonstrates the effect of debt on cost of capital and value in the case of banking firms. Using a static partial equilibrium setting, both in a steady state and steady growth scenario, we derive a bank-specific valuation metric which separately attributes value to assets and debt cash flows in the form of a liquidity premium and tax-shield. We run our model on a sample of the largest 26 European banks from 2003 to 2016 finding that the value contribution of debt benefits to enterprise value is large and persistent. Further from our model, we derived an implied cost of capital (ICC) measure finding consistent results with capital asset pricing model (CAPM). The theoretical framework we present is helpful to address bank debt benefits valuation and to reconcile equity and asset side approaches.

Do firms pay more taxes after formalization? The answer to this question is nontrivial. Tax noncompliance can be a persistent behavior among formerly informal firms. Analyzing the relationship between formalization and tax payments can also be challenging if nonswitching and switching firms have different characteristics. I use a panel dataset built from five small and medium-sized enterprise surveys conducted in Viet Nam from 2005 to 2013. By comparing nonswitching informal firms to switchers, I show that switchers are more likely to pay taxes and to pay a higher amount, thereby confirming heterogeneity. By comparing switchers before and after formalization, I find that formalization increases tax payment likelihood by 20% and the tax amount paid by 93%. A control function approach indicates that my results are robust to potential endogeneity of formalization. Therefore, this paper provides supportive evidence for a key public policy rationale to promote formalization: increased tax revenues.

Public economics covers the welfare economics of social (as opposed to private) interests and aspects of public finance. This chapter considers the application of two methods of social economic evaluation of tourist developments, namely, social cost-benefit analysis and economic impact analysis. The role of social cost-benefit analysis in the assessment of tourism is illustrated by its application to the evaluation of inbound tourism. This is followed by a discussion of taxes on tourism and subsidies to promote it. The principle focus is on hotel room taxes. The analysis of taxes on tourism involves both public finance and welfare economics issues. The scope for and desirability of applying the user-pays principle to tourism is then examined.

A number of articles in financial economics have used quarterly or semi-annual mutual fund holdings data to test hypotheses about investment manager behavior. This article reexamines four well-known hypotheses in finance to determine whether the results of prior tests of these hypotheses remain valid when higher frequency (monthly) holdings data are employed. The areas examined are: momentum trading, tax-motivated trading, window dressing, and tournament behavior We find that the use of monthly holdings data rather than quarterly holdings data or, in the case of tournament behavior. holdings data rather than monthly return data, change, and in some cases reverse, previous results. This occurs because monthly holdings data capture a large number of trades missed by quarterly data (18.5% of the trades) and permit a more precise estimation of the timing of trades.