A Problem of Financial Market Equilibrium When the Timing of Tax Payments is Indeterminate
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NBER Working Paper No. 1713 (Also Reprint No. r0832)
Issued in March 1987
NBER Program(s): PE
If firms are indifferent about the timing of dividends, the government's cash flow from taxes on dividends is indeterminate. In an earlier paper, I showed in the context of a world without uncertainty that variations in tax receipts from this source would have no real effects. The extension of the analysis to a world of risk turns out to involve new elements that may be of some general interest. In particular, the conditions for neutrality seem less likely to be fulfilled in a practical context.
Published: Heller, Walter P., Ross M. Starr and David A. Starrett (eds.) Social Choice and Public Decision Making: Essays in Honor of Kenneth J. Arrow. New York: Cambridge University Press, 1986.
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