[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ioe/doctra/268.html
   My bibliography  Save this paper

Taxation and Private Investment: Evidence for Chile

Author

Listed:
  • Rodrigo Vergara

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract
Along with several structural reforms, Chile embarked upon a major income tax reform in the eighties. Its basic feature was a significant reduction in the corporate income tax rate. The purpose of this paper is to investigate empirically the link between the tax reform and the investment performance of Chile since the reform. Macroeconomic and microeconomic evidence is found to be consistent with the hypothesis of the reduction in the corporate income tax as being one of the determinants of the investment boom of the late eighties and nineties in Chile. Macro data for the period 1975-2003 are used and the evidence indicates that the tax reform explains an increase in private investment of three percentage points of the GDP. On the other hand, information on 87 publicly held companies is used to construct a panel for the period 1980-2002. The microeconomic evidence confirms that investment was positively affected by the tax reform.

Suggested Citation

  • Rodrigo Vergara, 2004. "Taxation and Private Investment: Evidence for Chile," Documentos de Trabajo 268, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:268
    as

    Download full text from publisher

    File URL: https://www.economia.uc.cl/docs/doctra/dt-268.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chang-Tai Hsieh & Jonathan A. Parker, 2007. "Taxes and Growth in a Financially Underdeveloped Country: Evidence from the Chilean Investment Boom," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2007), pages 1-53, August.
    2. Cummins, Jason G. & Hassett, Kevin A. & Hubbard, R. Glenn, 1996. "Tax reforms and investment: A cross-country comparison," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 237-273, October.
    3. Honohan, Patrick, 2001. "European and International Constraints on Irish Fiscal Policy," Papers BP2002/2, Economic and Social Research Institute (ESRI).
    4. Serven, Luis & Solimano, Andres, 1992. "Private Investment and Macroeconomic Adjustment: A Survey," The World Bank Research Observer, World Bank, vol. 7(1), pages 95-114, January.
    5. Alan J. Auerbach & Kevin Hassett & Jan Sodersten, 1995. "Taxation and Corporate Investment: The Impact of the 1991 Swedish Tax Reform," NBER Working Papers 5189, National Bureau of Economic Research, Inc.
    6. repec:esr:chaptr:jacb200114 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lei Zhang & Yuyu Chen & Zongyan He, 2018. "The effect of investment tax incentives: evidence from China’s value-added tax reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 913-945, August.
    2. Rodrigo A. Cerda & Diego Saravia, 2009. "Corporate Tax, Firm Destruction and Capital Stock Accumulation: Evidence From Chilean Plants, 1979-2004," Working Papers Central Bank of Chile 521, Central Bank of Chile.
    3. Matjaž Črnigoj, 2016. "The Responsiveness of Corporate Investments to Changes in Corporate Income Taxation During the Financial Crisis: Empirical Evidence from Slovenian Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(9), pages 2165-2177, September.
    4. Rodrigo Cerda N. & José Ignacio Llodrá V., 2017. "Impuestos corporativos y capital: veintiséis años de evidencia en empresas," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 20(1), pages 050-071, April.
    5. Yongzheng Liu & Jie Mao, 2019. "How Do Tax Incentives Affect Investment and Productivity? Firm-Level Evidence from China," American Economic Journal: Economic Policy, American Economic Association, vol. 11(3), pages 261-291, August.
    6. Liu, Xiaohan & Liu, Jianmin & Wu, Haitao & Hao, Yu, 2022. "Do tax reductions stimulate firm productivity? A quasi-natural experiment from China," Economic Systems, Elsevier, vol. 46(4).
    7. Philippon, Thomas & Raddatz, Claudio, 2007. "Comments," LSE Research Online Documents on Economics 123061, London School of Economics and Political Science, LSE Library.
    8. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 1-22, September.
    9. Andrés Fernández & Ayşe İmrohoroğlu & Cesar E. Tamayo, 2019. "Saving Rates in Latin America: A Neoclassical Perspective," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(4), pages 791-823, December.
    10. Bustos, Alvaro & Engel, Eduardo M. R. A. & Galetovic, Alexander, 2004. "Could higher taxes increase the long-run demand for capital? Theory and evidence for Chile," Journal of Development Economics, Elsevier, vol. 73(2), pages 675-697, April.
    11. Magud, Nicolas E. & Pienknagura, Samuel, 2024. "The return of expansionary austerity: Firms' investment response to fiscal adjustments in emerging markets," Journal of International Money and Finance, Elsevier, vol. 143(C).
    12. Caballero, Ricardo J., 1999. "Aggregate investment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862, Elsevier.
    13. Johnson Adelakun & Kanayo Ogujiuba, 2023. "A Comparative Analysis of the Determinants of Foreign Direct Investment: The Case of Top Ten Recipients of Foreign Direct Investment in Africa," Economies, MDPI, vol. 11(10), pages 1-14, September.
    14. Abhay Aneja & Nirupama Kulkarni & S. K. Ritadhi, 2021. "Consumption Tax Reform and the Real Economy: Evidence From India's Adoption of a Value‐Added Tax," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 18(3), pages 569-602, September.
    15. Ranjan Kumar Dash & Deepa Jitendra Gupta & Tarun Khandelwal, 2024. "Revisited the role of foreign aid in capital formation: experience of South Asian countries," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    16. Karuppiah Sankarganesh & K. Rangasamy Shanmugam, 2023. "Effect of corporate income tax on investment decisions of Indian manufacturing firms," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 28(1), pages 156-175, January.
    17. J. B. Chatelain & Andrea Generale & I. Hernando & U. von Kalckreuth & P. Vermeulen, 2001. "Firm investment and monetary transmission in the euro area," Temi di discussione (Economic working papers) 431, Bank of Italy, Economic Research and International Relations Area.
    18. Chirinko, Robert S., 2002. "Corporate Taxation, Capital Formation,and the Substitution Elasticity Between Labor and Capital," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(2), pages 339-355, June.
    19. Jason G. Cummins, 2000. "Taxation and the Sources of Growth: Estimates from U.S. Multinational Corporations," NBER Chapters, in: International Taxation and Multinational Activity, pages 231-264, National Bureau of Economic Research, Inc.
    20. Lewe, Stefan, 2003. "Wachstumseffiziente Unternehmensbesteuerung," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20042, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).

    More about this item

    Keywords

    Private investmen; corporate income tax; user's cost of capital;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jaime Casassus (email available below). General contact details of provider: https://edirc.repec.org/data/iepuccl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.