Finally out in the AER 🥳🥳!! ⬆️ dividend taxes leads to ⬆️ investment and reduces capital misallocation as firms ⬇️ dividends and reinvest 30% of the unpaid dividends, particularly when they have high ex-ante marginal revenue returns to capital and investment opportunities. A🧵
Conversation
Replying to
In 2013, France increased dividend taxes by a factor of 3 (from 15.5 to 46.6) for certain type of firms ➡️ we can do a classic DiD to study the reform.
2
5
36
1. Taxed firms reduce their dividends, with an elasticity of around .5 (roughly equivalent to the elasticity estimated for the Bush tax CUT)
1
3
34
What did entrepreneurs do with this extra available cash? They reinvest around a third of it. So higher dividend taxes = MORE investment
1
8
46
Of course, this extra investment could be bad if entrepreneurs invest in unproductive projects. But actually only entrepreneurs with high investment opportunities and high ex-ante marginal revenue return to capital invested more ➡️ misallocation *decreased*
1
4
31
The remaining money was used to increase credit to customers and store in liquidity. Firms expanded and became less risky
1
2
22
Taxation is likely an important determinants of capital misallocation, in particular in the presence of heterogeneous financing frictions, something I am exploring more systematically now, so stay tune!
1
1
29
A special thank to who discussed this paper since its very genesis, to for the support and million re-reading of the paper and to and for our endless discussions on misallocation
1
1
22
a final expression of endless gratitude to who was the best editor anyone can dream of: fast, clear, transparent and willing to take us seriously, despite none of us on the paper being from the Public Economic field. Our profession can feel sometime clubby and
1
1
19
people like definitely restores faith in the fact we are doing science and should evaluate research on its pure intellectual merit
1
17
