Developing countries have a variety of governmental and trade policies which are intended to affect the return to capital. In an estimation of the return to capital in Colombia an attempt is made to account for taxes, both direct and indirect, governmental subsidies, and trade taxes and subsidies. The economic income that accrues to Colombia's capital stock is estimated by estimating the growth of the capital stock and the net cash flows generated by that capital. Additionally, the average annual effective rate of protection to the manufacturing sector is estimated; then using these effective rates of protection, a test is made to determine if in fact protectionism affects the return to capital. Results reveal that there is a significant positive relationship between trade protection and the rate of return to capital in Colombia. Furthermore, support is found for a Stopler-Samuelson effect of higher prices in the labourintensive agricultural sector leading to decline in the return for capital. Therefore, government policies do in fact cloud market signals and distort relative factor prices resulting in the misallocation of resources.

We analyze the initial corporate response to the 2017 enactment of the “Tax Cuts and Jobs Act” (TCJA). The TCJA changed many corporate tax provisions, including a reduction of the corporate statutory tax rate from 35 percent to 21 percent effective in 2018 and sweeping changes to the taxation of income earned abroad by U.S. corporations. Based on a sample of U.S. corporate tax returns, we find that corporations accelerated deductions into 2017 and delayed income into 2018, thereby minimizing their taxes. We estimate an income and deduction shifting tax elasticity of -0.11 and 0.08, respectively. Additionally, we study detailed tax returns of 81 large corporations to understand how those changes impacted them.

We show that, for both individuals and corporations, there is an aggregate overhang of realized losses that can be expected to have persistent effects. At the taxpayer level, we use panel data to show that the transition probabilities between taxpayers' states of capital realizations-losses, gains, or zero-do not meet the restrictions required for them to be modeled as following a simple time-homogeneous Markov process. Further, a simple Markov model built around the long-term transition probabilities would be too persistent to match short-term transitions. We show that the summary statistics we consider are closely comparable between cohort panels and panels constructed from the overlap of annual cross-sectional data.

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