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The Asset Price Approach to the Analysis of Capital Income Taxation

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  • Lawrence H. Summers

Abstract

This paper summarizes my recent research directed at the development of an asset price approach to the analysis of capital income taxation. While asset prices play a crucial role in many macroeconomic models, they have been subordinate in most previous efforts to study the effects of capital income taxation on economic behavior. A number of reasons for focusing on the role of asset prices in analyzing public finance questions are discussed. These include the role of asset prices in determining investment decisions, and the fact that changes in asset prices are indicators of the horizontal and vertical equity effects of tax reforms. Recent empirical research in which asset price information is studied in order to measure the effects on economic behavior of tax reforms and to distinguish between alternative models of the effects of capital income taxation is reviewed. Directions for future research in public finance, focusing on asset markets, are also discussed.

Suggested Citation

  • Lawrence H. Summers, 1984. "The Asset Price Approach to the Analysis of Capital Income Taxation," NBER Working Papers 1356, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1356
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    1. Lawrence H. Summers, 1982. "The Nonadjustment of Nominal Interest Rates: A Study of the Fisher Effect," NBER Working Papers 0836, National Bureau of Economic Research, Inc.
    2. David Lipton & James M. Poterba & Jeffrey Sachs & Lawrence H. Summers, 1983. "Multiple Shooting in Rational Expectations Models," NBER Technical Working Papers 0003, National Bureau of Economic Research, Inc.
    3. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, vol. 22(2), pages 135-167, November.
    4. Lawrence H. Summers, 1981. "Inflation and the Valuation of Corporate Equities," NBER Working Papers 0824, National Bureau of Economic Research, Inc.
    5. Abel, Andrew B., 1980. "Empirical investment equations : An integrative framework," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 39-91, January.
    6. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
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    Cited by:

    1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
    2. Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.
    3. Lyon, Andrew B., 1989. "The effect of the investment tax credit on the value of the firm," Journal of Public Economics, Elsevier, vol. 38(2), pages 227-247, March.

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