Hartwick, John M., Karp, Larry and Van Long, Ngo
Depreciation rules and value invariance with extractive firms
Journal of Economic Dynamics and Control, 26, (1), . (doi:10.1016/S0165-1889(00)00019-1).
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The application of Samuelson's theorem on value invariance to the case of intertemporally optimizing firms is shown to require a judiciously chosen economic depreciation formula which depends on both current stock and current flow variables, in order to prevent the firms from changing their actions in the face of the tax regime. We illustrate by deriving depreciation rules which achieve non-distortingness of actions and value-invariance for resource-extracting firms.
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