Some Implications of Corporate Taxation for Rent-Seeking Activity |
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Authors: | Katz Eliakim Rosenberg Jacob |
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Affiliation: | 1. Department of Economics, York University, Canada 2. Department of Economics, Bar Ilan University, Israel
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Abstract: | In this paper we show that corporate taxes are likely to have considerable implications for rent-seeking activity. We find that corporate taxation tends to significantly reduce rent-seeking, and that it favors rent-seeking by established firms and discriminates against new and zero profit firms. Indeed, we show that corporate tax regulations may completely block rent-seeking by new corporations, and that rent-seeking competitions may be characterized by an equilibrium that features a small number of profitable and well established firms. Tax regulations may therefore impart an oligopolistic tendency to rent-seeking markets. Moreover, our results may have significant implications for the effects of corporate taxes on patent races, tournaments, and other first-past-the-post competitions. |
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