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Tax Uncertainty and Investment: A Cross‐Country Empirical Examination
Author(s) -
Edmiston Kelly D.
Publication year - 2004
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbh071
Subject(s) - economics , empirical examination , volatility (finance) , investment (military) , monetary economics , european union , macroeconomics , international economics , econometrics , classical economics , politics , political science , law
An empirical examination of uncertain tax policy is crucial to a full understanding of the interplay between taxes and investment, especially given the ambiguities in the limited theoretical literature. This article empirically investigates the impact on investment of volatility in effective tax rates on capital income in a cross‐section of the 15 countries of the European Union, the United States, and Japan. Panel regression results suggest that the volatility of effective tax rates on capital income has a significant negative impact on investment per worker, with elasticities ranging from −0.012 to −0.029.