Description

We investigate the impact of corporate taxation on capital stoc k. In the paper, we indicate that corporate taxation might not only distort the decision of each firm to invest but could also destroy firms. With this in mind, we estimate capital demand e quations, correcting for self-selection in the decision to produce by using the Heck man-Lee method and its panel data counterpart (Kyriadizou method). We us e Chilean plant-level data from 1979 to 2002 hich is a period with large variability in co rporate taxation. We find that corporate taxation has a considerable impact on the creation-destruc tion of firms and in addition, it also has an important impact on the decision of how much to invest for firms that are already involved in production.