Jean-François Wen, Fatih Yılmaz

Tax Elasticity Estimates for Capital Stocks

Section: Articles
FinanzArchiv (FA)

Volume 76 () / Issue 3, pp. 215-239 (25)
Published 18.05.2020

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We use panel cointegration techniques to estimate the long-run, tax-adjusted, user cost elasticity of capital (UCE) in a small open economy. The estimates exploit three sources of variation in Canadian tax policy: across provinces, industries, and years. The UCE is estimated to be between -1.1 and -1.3 for machinery and equipment. We also provide semielasticities of capital with respect to marginal effective tax rates (METR). Our construction of the user costs makes use of a detailed data set on federal and provincial tax policy variables.

Jean-François Wen No current data available.

Fatih Yılmaz No current data available.