In the spirit of Harberger, we apply a dynamic computable general equilibrium (CGE) model and estimate the excess burden stemming from the tax-induced distortion in the allocation of capital across the corporate and the non-corporate sectors in Germany. In doing so, we perform a counterfactual...

Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to...

There is ample evidence that internal capital markets incur efficiency costs for multinational enterprises (MNEs). This paper analyzes whether tax avoidance behavior interacts with the costs of running an internal capital market and how policies of competing governments respond to it. We show...

The effects of corporate taxation on firm behavior have been extensively discussed in the neoclassical model of firm behavior which abstracts from agency problems. As emphasized by the corporate governance literature, corporate investment behavior is however crucially influenced by diverging...