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The Incidence of Corporate Income Tax under Variable Returns to Scale

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  • Parai, Amar K

Abstract

A variable-returns-to-scale version of A. C. Harberger's (1962) corporate tax incidence model is developed to highlight the role of both sectoral factor intensities and returns-to-scale elasticities in the determination of the tax incidence. If production is subject to increasing returns to scale, the income of capital relative to labor might, or might not, fall as a result of the tax even when the taxed sector is capital intensive. If returns are decreasing and the taxed sector is capital intensive, the tax could raise the relative income of capital only if the returns-to-scale elasticity differential favors the untaxed sector.

Suggested Citation

  • Parai, Amar K, 1988. "The Incidence of Corporate Income Tax under Variable Returns to Scale," Public Finance = Finances publiques, , vol. 43(3), pages 414-424.
    • Handle: RePEc:pfi:pubfin:v:43:y:1988:i:3:p:414-24
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    Cited by:

    1. Jennifer C. Gravelle, 2010. "Corporate Tax Incidence: Review of General Equilibrium Estimates and Analysis: Working Paper 2010-03," Working Papers 21486, Congressional Budget Office.
    2. Gravelle, Jennifer, 2013. "Corporate Tax Incidence: Review of General Equilibrium Estimates and Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(1), pages 185-214, March.
    3. Jennifer C. Gravelle, 2011. "Incidencia del impuesto de renta a las sociedades: revisión y análisis de las estimaciones de equilibrio general," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(24), pages 153-191, January-J.

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