Economic Growth and the Debt Tax Shield

Research output: Contribution to conferencePosterResearchpeer-review


We study the general-equilibrium implications of the corporate debt tax shield in a growth economy that taxes household income and firm profits and redistributes tax revenues in anattempt to harmonize the lifetime consumption opportunities among households that differ in their endowments. Our model shows that in general equilibrium the tax shield’s reduction in the corporate after-tax borrowing rate is counteracted by an increase in the pre-tax rate. Our model further predicts the debt tax shield to lead to a higher growth rate of the economy and an increase in the degree of disparity in households’ lifetime consumption opportunities.
Original languageEnglish
Publication date2020
Publication statusPublished - 2020
EventAEA Annual Meeting 2020 - San Diego Marriott Marquis & Marina, San Diego, United States
Duration: 3 Jan 20205 Jan 2020


ConferenceAEA Annual Meeting 2020
LocationSan Diego Marriott Marquis & Marina
Country/TerritoryUnited States
CitySan Diego
Internet address

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