Publication:
Lobbying for Capital Tax Benefits and Misallocation of Resources during a Credit Crunch

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dc.contributor.authorZaourak, Gabriel
dc.date.accessioned2018-04-03T15:25:28Z
dc.date.available2018-04-03T15:25:28Z
dc.date.issued2018-04
dc.description.abstractCorporations often have strong incentives to exert influence on the tax code and obtain additional tax benefits through lobbying. For the U.S. financial crisis of 2007-09, this paper shows that lobbying activity intensified, driven by large firms in sectors that depend more on external finance. Using a heterogeneous agent model with financial frictions and endogenous lobbying, the paper studies the aggregate consequences of this rise in lobbying activity. When calibrated to U.S. micro data, the model generates an increase in lobbying that matches the magnitude and the cross-sector and within-sector variation observed in the data. The analysis finds that lobbying for capital tax benefits, together with financial frictions, accounts for 80 percent of the decline in output and almost all the drop in total factor productivity observed during the crisis for the non-financial corporate sector. Relative to an economy without lobbying, this mechanism increases the dispersion in the marginal product of capital and amplifies the credit shock, leading to a one-third larger decline in output. The paper also studies the long run effects of lobbying. Restricting lobbying implies welfare gains of 0.3 percent after considering the transitional dynamics to the new steady state.en
dc.identifierhttp://documents.worldbank.org/curated/en/354941522689036064/Lobbying-for-capital-tax-benefits-and-misallocation-of-resources-during-a-credit-crunch
dc.identifier.doi10.1596/1813-9450-8394
dc.identifier.urihttps://hdl.handle.net/10986/29607
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 8394
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectLOBBYING
dc.subjectFINANCIAL FRICTION
dc.subjectCREDIT MISALLOCATION
dc.subjectCREDIT CRUNCH
dc.subjectTAX POLICY
dc.subjectCAPITAL TAX
dc.subjectTAXATION
dc.titleLobbying for Capital Tax Benefits and Misallocation of Resources during a Credit Crunchen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleLobbying for Capital Tax Benefits and Misallocation of Resources during a Credit Crunch
okr.date.disclosure2018-04-02
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/354941522689036064/Lobbying-for-capital-tax-benefits-and-misallocation-of-resources-during-a-credit-crunch
okr.guid354941522689036064
okr.identifier.doi10.1596/1813-9450-8394
okr.identifier.externaldocumentum090224b085854c37_1_0
okr.identifier.internaldocumentum29772972
okr.identifier.reportWPS8394
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/354941522689036064/pdf/WPS8394.pdfen
okr.region.countryUnited States
okr.statistics.combined1129
okr.statistics.dr354941522689036064
okr.statistics.drstats829
okr.topicGovernance::Governance and the Financial Sector
okr.topicMacroeconomics and Economic Growth::Business Cycles and Stabilization Policies
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicMacroeconomics and Economic Growth::Fiscal Adjustment
okr.topicMacroeconomics and Economic Growth::Taxation & Subsidies
okr.unitMacroeconomics, Trade and Investment Global Practice
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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