摘要
This study utilizes the natural experiment of Taiwan's 1998 tax integration to investigate the tax effect on sole proprietors' investment. Based on panel data of 1995 and 1999 firm-level surveys, we find that the user cost elasticity of capital significantly equals -0.239. This estimate suggests that a sole proprietorship would increase its capital stock by 6.9 percent in response to the 1998 tax integration if it faced the top tax rates both before and after the integration. Moreover, this study suggests that large-size sole proprietorships are more liquidity constrained than their smaller counterparts.