Devereux, M. P., Lockwood, Ben and Redoano, Michela (2002) Do countries compete over corporate tax rates? Discussion Paper. London: Centre for Economic Policy Research (Great Britain). (Discussion paper (Centre for Economic Policy Research (Great Britain)).

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Abstract

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 1983-99. We find 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 multinational firms are discrete. We also find evidence of concave reaction functions, consistent with the model outlined in the Paper.

Item Type:	Working or Discussion Paper (Discussion Paper)
Subjects:	H Social Sciences > HJ Public Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Corporations -- Taxation, Competition, Taxation -- Mathematical models, International trade -- Taxation
Series Name:	Discussion paper (Centre for Economic Policy Research (Great Britain))
Publisher:	Centre for Economic Policy Research (Great Britain)
Place of Publication:	London
Date:	May 2002
Number:	No.340
Number of Pages:	54
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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? [Coventry] : University of Warwick, Economics Department. (Warwick economic research papers, no.642). http://wrap.warwick.ac.uk/id/eprint/1548
Related URLs:	Related item in WRAP Related item in WRAP
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URI:	http://wrap.warwick.ac.uk/id/eprint/1706

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