Azevedo, Alcino, Pereira, Paulo J. and Rodrigues, Artur (2021). Optimal timing and capacity choice with taxes and subsidies under uncertainty. Omega (United Kingdom), 102 ,
Abstract
We develop a real options model that examines the effect of government's subsidies and taxation policy on the timing and size of investments. We find that a higher depreciation rate or subsidy, or a lower tax rate, accelerates investments. The effect of subsidies on the investment size depends on whether the subsidy is fixed or variable: a fixed subsidy induces smaller size investments, whereas a variable subsidy encourages larger size investments. The tax and depreciation rates do not affect the size of the investment. For revenue-neutral incentive packages, the effect of changes in the above variables on the investment timing and size is not necessarily monotonic and it depends on the instrument of the tax-subsidy policy that is used to keep the new policy revenue neutral. There are also economic contexts in which an increase in the tax rate can accelerate investments of a larger scale.
Publication DOI: | https://doi.org/10.1016/j.omega.2020.102312 |
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Divisions: | College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship College of Business and Social Sciences > Aston Business School College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing Aston University (General) |
Additional Information: | © 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/ |
Uncontrolled Keywords: | Capacity choice,Investment subsidy,Real options,Taxation policy,Uncertainty,Strategy and Management,Management Science and Operations Research,Information Systems and Management |
Publication ISSN: | 1873-5274 |
Last Modified: | 02 Dec 2024 08:31 |
Date Deposited: | 08 Sep 2020 10:10 |
Full Text Link: | |
Related URLs: |
http://www.scop ... tnerID=8YFLogxK
(Scopus URL) https://www.sci ... 6666?via%3Dihub (Publisher URL) |
PURE Output Type: | Article |
Published Date: | 2021-07 |
Published Online Date: | 2020-07-25 |
Accepted Date: | 2020-07-17 |
Authors: |
Azevedo, Alcino
(
0000-0002-4751-6085)
Pereira, Paulo J. Rodrigues, Artur |
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License: Creative Commons Attribution Non-commercial No Derivatives
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