The Dividend Puzzle and Tax: A Note

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The dividend puzzle, where consumers prefer capital gains to dividends due to differences in taxation, is examined in a two-period general equilibrium model with heterogeneous agents. Stressing the importance of interfirm equity holdings
and their tax treatment, different scenarios where dividends are paid to some or all consumers in equilibrium are exposed, giving rise to the potential formation of tax clienteles.


Original languageEnglish
Pages (from-to)2736-2743
Number of pages8
JournalEconomics Bulletin
Issue number3
Publication statusPublished - 2011