Do countries compete over corporate tax rates?
Devereux, M. P., Lockwood, Ben and Redoano, Michela (2002) Do countries compete over corporate tax rates? Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.642).
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This paper tests whether OECD countries compete with each other over corporate taxes in order to attract investment. We develop two models: with firm mobility, countries compete only over the statutory tax rate or the effective average tax rate, while with capital mobility, countries compete only over the effective marginal tax rate. We estimate the parameters of reaction functions using data from 21 countries between 1983 and 1999. Wefind evidence that countries compete over all three measures, but particularly over the statutory tax rate and the effective average tax rate. This is consistent with a belief amongst governments that location choices by multinationalfirms are discrete. We alsofind evidence of concave reaction functions, consistent with the model outlined in the paper.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HJ Public Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Organisation for Economic Co-operation and Development, Taxation -- Econometric models, Corporations -- Taxation, Capital movements|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||April 2002|
|Number of Pages:||54|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Description:||First version, May 2001; this version, April 2002|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC), University of Warwick. Centre for the Study of Globalisation and Regionalisation (CSGR)|
|Realised As:||Devereux, M.P., Lockwood, B. and Redoano, M. (2008). Do countries compete over corporate tax rates? Journal of Public Economics, 92(5-6), pp. 1210-1235. http://wrap.warwick.ac.uk/id/eprint/30109|
|Version or Related Resource:||Devereux, M.P., Lockwood, B. and Redoano, M. (2002). Do countries compete over corporate tax rates? London : Centre for Economic Policy Research. (Discussion paper (Centre for Economic Policy Research (Great Britain)), no.3400). http://wrap.warwick.ac.uk/id/eprint/1706|
Anselin, L., K. Bera, R. Florax, M. Yoon, (1996) “Simple diagnostic tests for spatial dependence,” Regional Science and Urban Economics, 26, 77-104.
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