Tax policy and the financing of innovation
We study tax policy in a Schumpeterian growth model with asymmetric information in the financing of innovation. Investors cannot a priori distinguish between more or less talented entrepreneurs. Net-worth allows talented entrepreneurs to self-invest and avoid being pooled with less talented entrepre...
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| Format: | Article |
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Elsevier
2016
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| Online Access: | https://eprints.nottingham.ac.uk/31928/ |
| _version_ | 1848794298400636928 |
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| author | Bryce, Luis A. Bonfatti, Roberto Luigi, Pisano |
| author_facet | Bryce, Luis A. Bonfatti, Roberto Luigi, Pisano |
| author_sort | Bryce, Luis A. |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We study tax policy in a Schumpeterian growth model with asymmetric information in the financing of innovation. Investors cannot a priori distinguish between more or less talented entrepreneurs. Net-worth allows talented entrepreneurs to self-invest and avoid being pooled with less talented entrepreneurs in the credit market. Increasing net-worth boosts innovation even when financed through higher profit taxes. Taxing consumption effectively raises net-worth and subsidizes profits simultaneously. Sufficiently taxing consumption implements the social optimum free of adverse selection. If forced to tax consumption less, the government implements a second best allocation with adverse selection when boosting net-worth enough to avoid adverse selection requires taxing profits excessively. |
| first_indexed | 2025-11-14T19:13:58Z |
| format | Article |
| id | nottingham-31928 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:13:58Z |
| publishDate | 2016 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-319282020-05-04T20:03:20Z https://eprints.nottingham.ac.uk/31928/ Tax policy and the financing of innovation Bryce, Luis A. Bonfatti, Roberto Luigi, Pisano We study tax policy in a Schumpeterian growth model with asymmetric information in the financing of innovation. Investors cannot a priori distinguish between more or less talented entrepreneurs. Net-worth allows talented entrepreneurs to self-invest and avoid being pooled with less talented entrepreneurs in the credit market. Increasing net-worth boosts innovation even when financed through higher profit taxes. Taxing consumption effectively raises net-worth and subsidizes profits simultaneously. Sufficiently taxing consumption implements the social optimum free of adverse selection. If forced to tax consumption less, the government implements a second best allocation with adverse selection when boosting net-worth enough to avoid adverse selection requires taxing profits excessively. Elsevier 2016-03 Article PeerReviewed Bryce, Luis A., Bonfatti, Roberto and Luigi, Pisano (2016) Tax policy and the financing of innovation. Journal of Public Economics, 135 . pp. 32-46. ISSN 0047-2727 Innovation; Tax policy; Asymmetric information; Adverse selection http://www.sciencedirect.com/science/article/pii/S0047272715002145 doi:10.1016/j.jpubeco.2015.12.010 doi:10.1016/j.jpubeco.2015.12.010 |
| spellingShingle | Innovation; Tax policy; Asymmetric information; Adverse selection Bryce, Luis A. Bonfatti, Roberto Luigi, Pisano Tax policy and the financing of innovation |
| title | Tax policy and the financing of innovation |
| title_full | Tax policy and the financing of innovation |
| title_fullStr | Tax policy and the financing of innovation |
| title_full_unstemmed | Tax policy and the financing of innovation |
| title_short | Tax policy and the financing of innovation |
| title_sort | tax policy and the financing of innovation |
| topic | Innovation; Tax policy; Asymmetric information; Adverse selection |
| url | https://eprints.nottingham.ac.uk/31928/ https://eprints.nottingham.ac.uk/31928/ https://eprints.nottingham.ac.uk/31928/ |