“Tax Wedges, Financial Frictions, and Misallocation” Research Seminar organised by the Institute of EconomicsÁrpád Ábrahám, a researcher at the University of Bristol, visited the Institute of Economics on 24th November 2021.
At the lunchtime research seminar, he introduced us to his recent research project about how different legal forms of American firms might influence the company’s tax burden. Therefore, a so-called tax wedge appears. In a nutshell, he and his co-authors developed a model which showed how the tax wedge depends on – amongst others – financial frictions, the size of the firms, and, eventually, leads to an endogenous choice of the legal form. An increase in the tax wedge increases the tax burden of the workers partly by general equilibrium effects. More specifically, the higher the tax wedge, the fewer owners will choose the more efficient legal form, which, in turn, leads to lower employment and a significant misallocation of resources. The approach mainly relies on the static description of occupational choice, organisation form choice, and investment choice; however, plans introduce explicit dynamics.
The research seminar was preceded and followed by personal discussions with PhD students and colleagues who all unanimously and enthusiastically reported positively about the meetings. His personality, tremendous experience, and warm, supporting attitude made this day unforgettable.
Thanks to the Research Management Office for the support without which this event could not have been organised.