assumed constant corporate tax cut model equivalent tax capital taxes firms look maximize math display block j max kl tau left f kl wl right rk equiv max kl tau left f k w right l rk math math display inline tau math capital tax rate math display inline w math wages per worker math display inline r math exogenous interest rate first order optimality conditions become math display block begin aligned frac partial j partial k tau f' k r frac partial j partial l tau left f k f' k k w right end aligned math therefore optimality conditions imply math display block r tau f' k quad w f k f' k k math define
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