RESEARCH
Publications
Taxation and the Life Cycle of Firms (joint with Andrés Erosa)
Forthcoming, Journal of Monetary Economics, Volume 105; August 2019
[ Published version ] [ Draft ] [ Online Appendix ] [ BibTex ]
We extend the Hopenhayn and Rogerson (1993) framework of firm dynamics to understand how different forms of taxing capital income affect investment and financial policies over the life cycle of firms. Relative to dividends and capital gains taxation, corporate income taxation slows down growth over the life cycle by reducing after-tax profits available for reinvesting in the firm. It also diminishes entry by negatively affecting the value of entrants relative to the that of incumbents firm. After a tax reform eliminating the corporate income tax in a revenue neutral way, output and capital increase by 12% and 32%. The large response of firm entry to the tax reform is crucial for our results.
Working Papers
Macroeconomics, Firm Dynamics and IPOs
[ Draft ] [ BibTex ]
In the last decades, there have been several changes in the economic environment regarding taxes, access to credit and idiosyncratic productivity shock process in the US. I argue these changes might impact differently privately held and publicly traded firms, having therefore implications for the endogenous decision to become public (IPO) and their macroeconomic consequences. I extend a model of firm dynamics with private and publicly traded firms, where I explicitly model the going public decision. Firms are born private, grow by reinvesting profits and/or borrowing, and can eventually do an IPO and become public. Being public, firms can access to costly equity financing, but have to pay an ongoing cost of operation. I calibrate the model to the US, and study how the observed changes in the last decades of taxes, equity issuance costs, the costs of being public, access to credit and idiosyncratic shock process impact a) changes in selection into public (IPO); b) firms’ policies; and c) macroeconomic aggregates. I find the decrease in corporate and dividend taxes in the 1990s contributes to the increase in share of public firms, and the changes in firms’ policies observed in the data, having a larger impact than changes in equity issuance costs. An increase in the cost of being public is at odds with the changes in selection into public and firms’ policies observed in the data during the 2000s, and so is an increase access to credit. Changes in the idiosyncratic shock process can reconcile the trends in behaviour and selection of publicly traded firms, and have important macroeconomic implications.
Work in Progress
Taxation and Innovation (joint with Andrés Erosa and Emircan Yurdagul)
Corporate Savings and Bankruptcy Choices
Taxation and the Life Cycle of Firms (joint with Andrés Erosa)
Forthcoming, Journal of Monetary Economics, Volume 105; August 2019
[ Published version ] [ Draft ] [ Online Appendix ] [ BibTex ]
We extend the Hopenhayn and Rogerson (1993) framework of firm dynamics to understand how different forms of taxing capital income affect investment and financial policies over the life cycle of firms. Relative to dividends and capital gains taxation, corporate income taxation slows down growth over the life cycle by reducing after-tax profits available for reinvesting in the firm. It also diminishes entry by negatively affecting the value of entrants relative to the that of incumbents firm. After a tax reform eliminating the corporate income tax in a revenue neutral way, output and capital increase by 12% and 32%. The large response of firm entry to the tax reform is crucial for our results.
Working Papers
Macroeconomics, Firm Dynamics and IPOs
[ Draft ] [ BibTex ]
In the last decades, there have been several changes in the economic environment regarding taxes, access to credit and idiosyncratic productivity shock process in the US. I argue these changes might impact differently privately held and publicly traded firms, having therefore implications for the endogenous decision to become public (IPO) and their macroeconomic consequences. I extend a model of firm dynamics with private and publicly traded firms, where I explicitly model the going public decision. Firms are born private, grow by reinvesting profits and/or borrowing, and can eventually do an IPO and become public. Being public, firms can access to costly equity financing, but have to pay an ongoing cost of operation. I calibrate the model to the US, and study how the observed changes in the last decades of taxes, equity issuance costs, the costs of being public, access to credit and idiosyncratic shock process impact a) changes in selection into public (IPO); b) firms’ policies; and c) macroeconomic aggregates. I find the decrease in corporate and dividend taxes in the 1990s contributes to the increase in share of public firms, and the changes in firms’ policies observed in the data, having a larger impact than changes in equity issuance costs. An increase in the cost of being public is at odds with the changes in selection into public and firms’ policies observed in the data during the 2000s, and so is an increase access to credit. Changes in the idiosyncratic shock process can reconcile the trends in behaviour and selection of publicly traded firms, and have important macroeconomic implications.
Work in Progress
Taxation and Innovation (joint with Andrés Erosa and Emircan Yurdagul)
Corporate Savings and Bankruptcy Choices
