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This paper outlines and tests two agency models of dividends. According to the " outcome " model, dividends are the result of effective pressure by minority shareholders to force corporate insiders to disgorge cash. According to the " substitute " model, insiders interested in issuing equity in the future choose to pay dividends to establish a reputation(More)
1 How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility(More)
The rapid rise in sales over the Internet and the fact that most Internet buyers pay no sales tax has ignited a considerable debate over taxes and the Internet. This paper uses new data on the purchase decisions of approximately 25,000 online users to examine the effect of local sales taxes on Internet commerce. The results suggest that, controlling for(More)
This paper analyzes the capital structures of foreign affiliates and internal capital markets of multinational corporations. Ten percent higher local tax rates are associated with 2.8 percent higher debt/asset ratios, with internal borrowing particularly sensitive to taxes. Multinational affiliates are financed with less external debt in countries with(More)
We show that the e¤ects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by …rms. We develop a model in which …rms post job o¤ers characterized by an hours requirement and workers pay search costs to …nd jobs. We present evidence supporting three predictions of this model by analyzing(More)
Even modest reductions in the after-tax cost of capital purchases provide strong incentives for increased investment. Indeed, for tax subsidies that are temporary, and for capital goods that are very long-lived, the incentive to invest when the after-tax price is temporarily low is essentially infinite. Firms that would have purchased new capital equipment(More)
Legislating predictable changes in tax rates violates one of the cardinal principles of public finance: changes in tax rates should be permanent and immediate. Taxation typically distorts economic behavior and, because the deadweight burden of taxation is a convex function of the tax rate, there are efficiency gains to equalizing tax rates over time. As(More)
This paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods (FIGs), such as education and the environment, when agents are sel sh or exhibit paternalistic altruism. We show that backward intergenerational goods (BIGs), such as social security, play a crucial role in sustaining investment in FIGs: without(More)
This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates. OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes. U.S. time series data tell a very different(More)