Globalisation and the mix of wage and profit taxes

Haufler, Andreas; Klemm, Alexander and Schjelderup, Guttorm (February 2006): Globalisation and the mix of wage and profit taxes. Discussion Papers in Economics 2006-7

Abstract

This paper analyses the development of the ratio of corporate taxes to wage taxes using a simple political economy model with internationally mobile and immobile firms. Among other results, our model predicts that countries reduce their corporate tax rate, relative to the wage tax, either when preferences for public goods increase or when a rising share of capital is employed in multinational firms. The predicted relationships are tested using panel data for 23 OECD countries for the period 1980 through 2001. The results of the empirical analysis support our central hypotheses.

• Item Type: Paper
• Keywords: capital and labour taxes; economic integration; multinational firms
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > International Trade; Economics > Munich Discussion Papers in Economics > Public Finance; Economics > Chairs > Seminar for Economic Policy
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: H20, H73, F15, F23
• Language: English