Motivated by the Jobs and Growth Tax Relief Reconciliation Act of 2003, we study the eﬀects of capital income tax cuts in a framework where firms make investment decisions to maximize their market value and households are subject to uninsurable labor income risk. We find that the eﬀects of capital gains tax cuts are qualitatively similar to those found in the absence of household heterogeneity. However, dividend tax cuts surprisingly lead to a reduction in aggregate investment. This is because they increase the market value of the existing capital. In equilibrium, households then require a higher return to hold this additional wealth, leading to a lower capital stock. This also implies that dividend tax cuts are welfare reducing in the long run, not only because of the traditional reasons of redistribution from poor to rich, but also because of a fall in long run aggregate output and consumption. Taking into account the transition mitigates the losses but the JGTRRA tax cuts still lead to a welfare reduction equivalent to a 0.5% drop in consumption. In line with empirical evidence, the model also predicts substantial increases in dividends and stock prices following the tax cuts.
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olicy makers in housing sector seeks to use instruments by which they can control volatility of housing price and prevent high disturbances of the bubble and price shocks, or at least, reduce them. In the portfolio and speculation theories, it is emphasized that speculative demand for housing is the main cause of shocks and price volatilities in the sector. The theory of housing price bubble also describe the dominance of speculative demand and importance of asset demand in the composition of housing demand as the main cause of housing price shocks. Therefore, capital gains tax, which is used in most developed countries, is regarded one of the strong instruments to control and direct housing speculation to minimize damages to the sector. In this study, an attempt has been paid to investigate the effect of capital gains tax on housing prices using panel data for 18 countries (including Iran) over the period from 1991 to 2004. The results show that the efficiency of capital gains tax in countries with capital gains tax system is higher than that of countries lacking the system. In all estimated equations, the real capital gains tax and its share of total tax, contribute significantly to the stabilization of housing prices and controlling housing price volatility. The intermediate objectives of monetary policy, including pegged interest rates and liquidity play a significant role in achieving the ultimate goals of monetary policy such as the housing price bubble and inflation. In addition, the prices of assets have been among the factors affecting housing prices in countries under study.
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Reducing capital gains taxes also causes realizations to rise as investors and business persons cash-in long-term capital gains. Consumer spending increases as capital gains realizations, after tax, are spent or saved. The rise in asset prices, both in the values of equity and residential real estate, is reflected in a stronger household balance sheet and reductions in debt because of increased income and capital gains realization (Pınar 2012). The amount of revenue raised by the higher tax rates on capital gains is uncertain because it depends on how realizations will respond to the higher tax rates. If realizations of gains fall substantially, little net revenue may be generated; realizations could even fall so far that revenue is lost under the higher rates. The more that a capital gains tax cut raises the return to savers and lowers the cost of capital to businesses, and the more that saving and investment respond to such changes, the more likely it is that such a tax cut will spur saving and investment and raise GNP. Reducing the taxation of capital gains could affect growth in several ways. Lower taxes on capital gains raise the real after-tax rate of return to savers, which may lower the cost of capital to businesses. When capital gains tax rates are raised, taxpayers may decide to defer taking gains or even to hold onto assets for as long as they live, passing the accrued gains to their beneficiaries tax free. A low capital gains tax rate has an important role to play in fostering economic growth and in promoting the entrepreneurial drive on which the Nigeria economy thrives.
this claim include Miller and Scholes (1978) and Stiglitz (1983), which together provide a num- ber of sophisticated financial strategies that can eliminate the personal tax on equity income. However, both Miller and Scholes (1978) and Stiglitz (1983) require strong assumptions for their results to hold. Some of these do not hold in practice, and others are unlikely to hold in practice. Other authors have argued that the payout method is irrelevant for firm value since investors can equalize the tax liability on dividends and accrued capital gains by selling and repurchasing equity around the ex-dividend day. If these transactions are carried out with non-taxed entities, such as pension funds, the tax liability on both sources of income can be equalized (for an explanation of how this strategy works see Allen and Michaely (2003) and Kalay (1984)). However, the effectiveness of this strategy relies on factors such as bid-ask spreads and the transactions costs of selling and buying equity. Elton et al. (1984) argue that these, and other costs, make this strategy ineffectual.
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vary a lot with the sample, indeed for these results the EU and EMU results a dramatically different, likely reflecting different stock market and exchange rate experiences for the UK and the EMU countries. For the EMU, income risk sharing has been large and negative during 1999–2003 where the EMU countries were relative laggards in terms of growth while the Euro was appreciating. Did this pattern lead to volatile consumption? It appears not, because when we include capital gains and losses in income this tends to lead to large and opposite effects on the estimated risk sharing from saving. For example, for EMU countries we found very little risk sharing from saving in the late period in Table 2 and here we find more than 100 percent risk sharing from saving! This result reflects that individuals do not adjust consumption much in the face of international capital gains and losses. Large amounts of foreign assets are held by financial institutions or indirectly through pension or mutual funds and apparently the marginal propensity to consume from capital gains on such funds is typically small at shorter time horizons. However, over long periods of time, capital gains are bound to matter: For example, pension funds will eventually pay out pensions as a function of the value of the assets held.
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Where the distinction between expected and unexpected capital gains is concerned, it is worth pointing out that capital gains, despite their high volatility, cannot be considered completely random. When deciding portfolio allocation, investors will take into account the opportunities for both income revenues and capital gains. Following this view, the expected component of capital gains should be added to capital incomes; in this case, the definition of capital gains proper would refer only to the deviation from the average value due to the random component. However, we will not adopt this distinction for two reasons. First of all, it is difficult to select asset price models that account for the time horizon of investors and for their heterogeneity. The estimation of expected capital gains is therefore dependent on subjective assumptions. Secondly, the long-run average of capital gains is normally much smaller than their variability, so that the correction has only slight effects on short- to medium-run estimates.
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32. Lee, supra note 10, at 49–50 (“During the first modern capital gains tax preference era from 1921-1986, the federal tax law dipped deeply in large incomes through nominally progressive income tax rates, but for large incomes consisting mostly of capital gains (taxed at effective rates substantially below the maximum individual ordinary income rate) such dipping was done with a very coarse grained sieve. Highest income taxpayers with substantial capital gains realization enjoyed a Federal tax effective rate lower than that of taxpayers with less income but where the income was wholly or mostly ordinary. Vertical equity or progressivity was a farce during this era.” (citations omitted)); see also id. at 9 (“Undersecretary of Treasury Ogden Mills, who had been a Wall Street tax lawyer and member of the House Ways and Means Committee in the early 1920’s, pointed out in the 1932 Senate Finance Committee Hearings that the real tax burden were state and local taxes borne by small and moderate income taxpayers.” (citation omitted)).
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would suggest t h a t the tax be l ev i e d only on r e a l i z e d gains with f u l l allowance f o r and a generous car r y- f or war d pro v i s i on of r e a l i z e d losses. Transfers by bequest or § i f t should be t r e a t e d as const r uct i ve r e a l i z a t i o n s and although some i n e q u i t i e s would be unavoidably introduced by these measures, the d i s t r i b u t i o n a l benef i t s would by f a r outweigh the disadvantages i nvol ved. To e l i mi n a t e i n e q u i t i e s stemming from the t a x a t i o n of gains in a si ngl e year which represent several years of a p p r e c i a t i on , a speci al provi si on p e r m i t t ing a formal spreading of such gains over several ye ar s, may be worth consi deri ng. This may be p a r t i c u l a r l y appl i cabl e to dealing wi t h gains from the sale of owner-occupied dwe l l i ngs. The r ecogni t i on t h a t gains of ten represent se veral year s' appr eci at i on does not j u s t i f y the abandonment of f u l l i ncl usi on of gains in income.
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A crucial consequence of the ongoing naturalization of ‘financialized valuation’ (Chiapello, 2015: 13-35) is that urban life in the present becomes subordinate to an economy of future options (Esposito, 2011). In light of the far-reaching social implications that accompany the remodeling of our cities as a volatile asset class, there is mounting pressure to grasp how architectural spaces are instrumentalized as a theater of speculative investment. While spectacular architecture and towering skylines, as in the case of the Persian Gulf city of Dubai, may serve to underscore the economic force of urban development, it is the phenomenon of ‘Dubaization’ (Elsheshtawy, 2010: 249-255) and its different variants – ever-evolving processes of abstraction and imitation, amplification and multiplication, manifesting themselves in market-friendly, globally compatible “spatial products” (Easterling, 2005: 1) – that we need to engage with in order to address the global spread of supply-led speculative urbanism following the turn of the millennium. Even though these ‘splintered’ styles of urban development have been implicated in the rise of the real estate bubbles that led to the global financial crisis in 2007/8, this experience has not brought an end to this investment model (Graham and Marvin, 2010: 33-36). Rather, we are seeing a higher concentration of investment in specific locations and types of development that are increasing social division by generating customized enclaves for global capital in urban cores that contrast starkly with overpopulated and impoverished urban peripheries (Merrifield, 2014).
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Here we need to take into account the intergenerational transmission of inequalities. Once an unequal division of labour is established, those workers who are parents will tend to pass on their advantages or disadvantages to their children. The processes by which those who inherit not only economic but cultural and social capital gain an advantage over those who lack these are well documented in sociology (Bourdieu, 1986; Lareau, 2006). The effects of the unequal division of labour on those entering the labour market are indirect, operating through the shaping of their expectations and capacities by the circumstances and behaviour of their parents. Even individuals’ degree of
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As indicated in the Fig. III, the first relationship shown by dotted line 1 represents the concept of production functions as applied to education and training, compensation and healthcare. The key assumption underlying this relationship is that investment in these practices results in increased learning and healthiness. The second relationship shown by number 2 in a circle represents the human capital relationship between learning (outcome from HCD investment) and increased productivity. The key assumption underlying this relation is that increased learning does, in fact, result in increased production process. The third and final relationship shown by number 3 in a circle represents the human capital relationship between increased productivity and increased wages and business earnings. The key assumption underlying this relationship is that greater productivity does, in fact, result in higher wages for individuals and earnings for businesses. As per conclusion, human capital does contribute to the organizational advantages and profits. The HCT has adequately and explicitly identified the pathways through which investment in human capital can lead to improve organizational performance. It thus provides a good theoretical support for the propositions and variables used in this study.
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technical efficiency levels. The results support the three-stage sigmoid (S-shaped) hypothesis as introduced by Contractor et al., (2003) and further discussed in Contractor (2007). The results show that in the initial stage of internationalization, i.e., up to 40% level the firms fail to have any technical efficiency gains due to costs and barriers to international expansion. However, once a firm overcomes this initial stage of multinationality, i.e., from 40% to 70% the effect is positive. This indicates technical efficiency gains due to the benefits linked with firms’ international expansion. Finally, for a higher degree of multinationality, i.e., greater than 70% the effect of multinationality on firms’ technical efficiency levels is negative. That means that firms have been over-internationalized with increased global coordination and managerial costs (Contractor, 2007). The effect of time in this case is positive suggesting that firms’ have increases their technical efficiency levels over the examined period (this is also confirmed from the results presented on Figure 1).
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This research paper addresses several issues related to intellectual capital including a historical overview, the interest in elusive and intangible assets, and the impact of latest technological progress associated with the information technology developments. Ralph Stayer, CEO of Johnsonville Foods Company was the first to use the term “intellectual property” to refer to the organization’s intangible assets. This paper also identifies the concept of intellectual property being a set of all knowledge capacities of the organizations that help them achieve their goals. The intellectual property includes ideas, inventions, technology, general knowledge, computer soft wares and programs, designs, data skills, processes, creativity and applications in all organizations. The intellectual capital is knowledge that can be converted into profits. The components of this concept were identified as follows: Structural capital, human capital, social capital and the psychological capital. The paper also discusses various definitions provided by several researchers relating to intellectual capital, amongst them: Edvinsson & Malone, K. E. Svieby, Y. Malhorta, T. Stewart, Despres & Channvel, and Mckenzie & Winkelen. Moreover, the researcher tackled different measures used in intellectual property assessment and classified them in the following clusters: (1) descriptive measures/scales that describe some traits and characteristics and are based on exploring views related to identify the impact of the intellectual capital on organizations’ business (2) scales and models correlated to the intellectual capital and the intellectual property, which measure the intellectual capital components (3) market value scales and models which focus on the book value of knowledge assets and their market value (4) scales and models of knowledge revenues which are based on calculating returns on assets (ROA). The paper concluded stating that specific issues relating to companies and the nature of the market made it impossible to come up with certain results that can be generalized when making comparison among modern administrative trends or attitudes which defined the intellectual capital as intangible assets. Thus, the researcher urged researchers and parties interested in building up and upgrading companies’ capacities to exert intensive efforts to boost investment in human capital for its key and influential role in accomplishing excellence and enhance the position of these companies.
In addition to particular sectors of the economy emerging as winners or losers of trade policy, one particularly salient distributive question is that between labour and capital. This concerns both the distribution between labour and domestic capital (see James’ Domestic Relative Gains principle) and between labour and foreign direct investment (see James’ International Relative Gains principle). In the cases of investor protection at the heart of this paper, James’ international principle requires an equal distribution of the gains from trade between the capital-exporting nation and the capital-importing nation, whereas his domestic principle additionally requires that within the capital- importing nation, the gains from trade should be shared equally between labour and capital. 18 It is difficult to isolate the question of the domestic distribution of the gains from trade from the question of the international distribution of the gains from trade. In section 3, I will bracket this distinction for two reasons. First, given the extreme mobility of capital today, the distinction between domestic and foreign capital seems less and less relevant. Second, drawing the distinction would make my argument significantly more complicated without adding substantial insight. 19
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Nevertheless, the shift backtoprevious steady state (due to law of diminishing returns) after an initial economic growth spurt following the foreign direct investment was considered unrealistic by many theorists. These endogenous growth theorists took Japan and South Korea as a motivating example and argued that both Japan and South Korea received a large amount of foreign direct investments and their economies continued to show a ‘permanent’ upward trend. These theorists inspired by Romer (1986), Lucas (1988) and Rebelo (1991) argued that economic growth models should include human capital accumulation and increasing returns to scale due to externalities. Since, foreign direct investments encourage not just increase in inputs of production but also new technology so FDI can endogenously generate productive growth. The important contribution of these line of theorists beyond the neoclassical growth theorists was a greater understanding of the channels that connect FDI and GDP per capita growth. Specifically, these endogenous growth theory models explain that foreign direct investments raise GDP per capita growth through generating spillover effects of knowledge transfers to the FDI recipient countries. These generate positive externalities as well as improve human capital accumulation and productivity growth. These second-generation models of endogenous growth theory that link human capital accumulation, externalities and innovation with the potential gains from foreign direct investment imply that increased FDI inflows can cause persistently positive impact on GDP per capita growth, consistent with the case of Japan, China and South Korea.
Our study differs from the existing literature in two major aspects. First, we use a new micro dataset — the 2011 China Household Finance Survey data — to estimate the effect of a change in housing value on homeowners’ labor force participation in urban China. This dataset contains detailed information on housing and other assets for each household, including the purchasing price and current value of each housing unit (up to three housing units for each household), as well as detailed demographic information. This enables us to compute each h ousehold’s housing capital gain and estimate its effect on labor supply. Second, to address possible measurement error in self-reported housing value and potential omitted variables, such as individual workers’ income expectation and preferences for urban amenities, we use the average housing capital gain of households (excluding the household in question) in the same community as an instrument variable for change in housing value. This instrumental-variable (IV) approach is intuitively appealing: a homeowner’s housing price change should be highly correlated with his or her neighbors’ housing price change, but whether this homeowner decides to work or not should not be affected directly by the neighbors’ housing price change s.
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Increasing the efficiency of inputs either in the process of factor accumulation or in the process of production of final products is considered as a main driving force for the sustainable growth of modern economies. Specifically, improving the efficiency of physical capital seems to be an important source of continued growth. Theoretically, reaching a stationary growth path is a basic requirement for economic growth models (Kaldor, 1961; Jones and Romer, 2010, p.225). However, by using a simple neoclassical growth model, this paper demonstrates that changes in the marginal product of capital and marginal efficiency of investment must sum to zero along a stationary growth path. That is, if the efficiency of physical capital accumulation is rising then it must be the case that capital becomes less efficient in the production process. In this sense, improving the overall efficiency of physical capital is unlikely to be the driving force for sustainable growth of modern economies!
Income differences across countries are enormous. In this paper, I quantify a novel channel through which countries gain from equipment trade: composition of capital. Over time, while the rich-poor gap in the aggregate capital-output ratio has been relatively stable, composition of capital has evolved considerably: the share of equipment has increased in rich countries and declined in many poor countries. Using a multi-country Ricardian trade model, I quantify the impact of the 1985-2005 fall in equipment trade barriers on capital composition and incomes. The decline in trade barriers accounts for approximately one-third of the changes in equipment capital shares. All countries gain income, and nearly one-half of these gains are transmitted via the capital composition channel. Poor countries benefit predominantly through the capital composition channel, and rich countries gain mostly through increases in their total factor productivity.
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4 market reactions to events that increase (decrease) the likelihood of inclusion of AFS fair value gains and losses in regulatory capital. A key challenge of examining the economic consequences of any regulation using stock market reactions is to control for concurrent confounding events (e.g., Leuz 2007). In addition, our study faces the issue that the Final Rule was discussed and passed as a package, which makes it difficult to separate the effects of a particular provision. We address this issue in four ways: First, to control for general trends affecting the U.S. financial industry, we benchmark stock market reactions of banks to those of insurance companies, which also hold significant amounts of AFS securities but are unaffected by the regulation. Second, we compare abnormal returns of advanced approaches banks with non-advanced approaches banks on the Final Rule date, when only advanced approaches banks were affected by the mandatory AOCI filter removal, but other aspects of the regulation remained similar for the two groups of banks. Third, we undertake a cross- sectional analysis to examine whether observed market reactions can be specifically attributed to the removal of the AOCI filter. Finally, to mitigate the concern that any cross-sectional findings are due to omitted correlated variables, we perform a bootstrapping analysis to benchmark our test results against results obtained on randomly selected non-event days.
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