Abstract
Pressure from short-horizon investors can hurt investments in innovative, long-run value-increasing projects. We explore the efficacy of a commonly proposed tax-based policy tool to mitigate this problem: the imposition of differentially greater taxes on short-term capital gains vis-a-vis long-term capital gains. Using a panel of 30 OECD countries in which seven countries exhibit 21 shocks to differential capital gains taxation over 1991-2006, we find that rewarding longer-term ownership through lower taxes is associated with greater innovation. The evidence adds to our understanding of the real effects of taxation on investor trading and should be of interest to lawmakers and regulators.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
