The effect of debt tax benefits on firm investment decisions

In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyze the investment decision in presence of a borrowing constraint on the amount of the debt that the firm can raise. We show that if the debt interest rate is decreasing in the firm capital accumulation and it is available another financial resource more expensive than debt (at least for levels of debt lower than the upper bound), then the deduction of the debt interest from taxes on capital income may reduce firm investment. This theoretical result should be considered when financial intermediaries are not willing to finance beyond a certain threshold but firms have access to other sources of finance.Corporate taxation; Financing constraints; Investment

The effect of debt tax benefits on firm investment decisions

In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyze the investment decision in presence of a borrowing constraint on the amount of the debt that the firm can raise. We show that if the debt interest rate is decreasing in the firm capital accumulation and it is available another financial resource more expensive than debt (at least for levels of debt lower than the upper bound), then the deduction of the debt interest from taxes on capital income may reduce firm investment. This theoretical result should be considered when financial intermediaries are not willing to finance beyond a certain threshold but firms have access to other sources of finance

Are chimpanzees really so poor at understanding imperative pointing? Some new data and an alternative view of canine and ape social cognition

There is considerable interest in comparative research on different species’ abilities to respond to human communicative cues such as gaze and pointing. It has been reported that some canines perform significantly better than monkeys and apes on tasks requiring the comprehension of either declarative or imperative pointing and these differences have been attributed to domestication in dogs. Here we tested a sample of chimpanzees on a task requiring comprehension of an imperative request and show that, though there are considerable individual differences, the performance by the apes rival those reported in pet dogs. We suggest that small differences in methodology can have a pronounced influence on performance on these types of tasks. We further suggest that basic differences in subject sampling, subject recruitment and rearing experiences have resulted in a skewed representation of canine abilities compared to those of monkeys and apes

Relative-preference shifts and the business cycle

This paper develops a two-sector dynamic general equilibrium model in which intertemporal fluctuations (and sectoral comovement) are driven by idiosyncratic shocks to relative preferences between consumption goods. This class of shocks may be interpreted as shifts in consumer tastes. When shifts in preferences occur, consumers associate a new and different level of satisfaction to the same basket of consumption goods according to the modi ed preferences. The paper shows that, if the initial composition of the consumption basket is sufficiently asymmetric, a shift in relative preferences produces a so strong "perception effect" capable of inducing inter and intra sectoral positive comovement of the main macroeconomic variables (i.e., output, consumption, investment, and employment). Furthermore, extending the theoretical framework to a multisector model and introducing a more flexible structure of the relative preference shock, we show that the parameter restrictions, necessary in order to observe sectoral comovement after a relative preference shock, are much less severe. In particular, the comovement between the most of the sectors emerges under general conditions, without requiring high asymmetry in the composition of the consumption basket and/or high aversion to risk. It is a welcome result that these fi ndings are reached without introducing either aggregate technology shocks or input-output linkages, or shocks perturbing the relative preference between aggregate consumption and leisure

The productivity effect of permanent and temporary labor contracts in the Italian manufacturing sector,” Economic Modelling

a b s t r a c t a r t i c l e i n f o JEL classification: D24 J24 Keywords: Total factor productivity Labor productivity Permanent and temporary labor contracts This paper studies the effect of permanent and temporary labor contracts on both labor-augmenting and TFPaugmenting technological factors using a panel dataset of Italian manufacturing firms. The empirical analysis applies a structural approach in which firm TFP follows a controlled Markov process that is affected by the relative use of labor contracts, and labor services are perfect substitutes but with different labor-augmenting factors. The empirical results show that when including labor-contract composition in the TFP process: i) the difference between permanent and temporary contracts in the labor-augmenting productivity factor is not significant and ii) the incidence of permanent contracts in total contracts has a positive effect on TFP dynamics

The Productivity effect of permanent and temporary labor contracts in the Italian manufacturing sector

This paper studies the effect of permanent and temporary labor contracts on both labor-augmenting and TFP-augmenting technological factors using a panel dataset of Italian manufacturing firms. The empirical analysis applies a structural approach in which firm TFP follows a controlled Markov process that is affected by the relative use of labor contracts, and labor services are perfect substitutes but with different labor-augmenting factors. The empirical results show that when including labor-contract composition in the TFP process: i) the difference between permanent and temporary contracts in the labor-augmenting productivity factor is not significant and ii) the incidence of permanent contracts in total contracts has a positive effect on TFP dynamics