Abstract
The theory that has been developed to derive the effective fiscal burden on cost of doing business (McKenzie, Mintz and Scharf 1997) allows one to measure effective tax rates on costs as a proper aggregator of effective tax rates on labour and capital) without observing the actual input prices. This is an improvement over past literature that incorporates non-capital taxes into effective tax rates on capital. This approach is quite wrong analytically since it overstates the effect of non-capital taxes on the capital decision.
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