Working Paper: NBER ID: w1024
Authors: Alan J. Auerbach
Abstract: This paper begins with a discussion of the measurement of business saving,with the conclusion that even "corrected" measures of business saving are quite inaccurate in the presence of inflation, leading to an overstatement of the recent decline in business saving. The remainder of the paper focuses on the more fundamental issue of why it should matter who saves. Beginning from their relevance proposition associated with the Modigliani-Miller theorem, we consider the channels through which taxation causes the identity of the saver to have real effects. Finally, we consider the relative efficiency of business versus personal savings incentives, in light of our results.
Keywords: business saving; taxation; investment incentives
JEL Codes: E21; E62; H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Taxation (H20) | Identity of the saver (D14) |
| Identity of the saver (D14) | Economic behavior (D22) |
| Taxation (H20) | Business saving (M21) |
| Corporate income tax system (H24) | Distinction in incentives between personal and business saving (D14) |
| Distinction in incentives between personal and business saving (D14) | Capital formation and investment behavior (E22) |
| Separation of corporate and personal taxes (H24) | Preference for debt financing over business saving (G32) |