@techreport{Rapp2008Equilibrium,
abstract = {We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate and a representative stand-in household. In this setting, the pricing effect for domestic securities is shown to be a function in three determinants: the covariance between pre-tax payoffs of securities and the aggregated market portfolio, the exogenous pre-tax interest rate and the effect of taxation (and redistribution) on the aggregate welfare of the stand-in household. We find that taxation of capital income is nondistorting if tax proceeds are immediately redistributed within the cohort of capital market participants. If, however, taxation represents a policy tool to transfer wealth from capital market participants to non-market participants, the level of the statutory tax rate is reflected in equilibrium security prices and taxation affects households portfolio decisions, which in turn may affect investment decision of firms.},
address = {Munich},
author = {Marc Steffen Rapp and Bernhard Schwetzler},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {G12; G18; H24; 330; equilibrium security prices; capital income tax; equity premium; Kapitalertragsteuer; Optimale Besteuerung; Steuerwirkung; Preisniveau; Externer Effekt; Zins; Theorie},
language = {eng},
number = {2008-08},
publisher = {Center for Entrepreneurial and Financial Studies (CEFS)},
title = {Equilibrium security prices with capital income taxes and an exogenous interest rate},
type = {CEFS working paper series},
url = {http://hdl.handle.net/10419/48419},
year = {2008}
}
