Abstract
| Original language | English |
|---|---|
| Place of Publication | London |
| Number of pages | 30 |
| Publication status | Published - 2015 |
Publication series
| Name | International Trade and Regional Economics |
|---|---|
| Publisher | Centre for Economic Policy Research |
| No. | 10800 |
| ISSN (Print) | 0265-8003 |
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Keywords
- corporate tax rate
- tax competition
- foreign direct investment (FDI)
- country size
Cite this
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Country Size and Corporate Tax Rate : Rational and Empirics. / Azémar, Céline; Desbordes, Rodolphe; Wooton, Ian.
London, 2015. (International Trade and Regional Economics; No. 10800).Research output: Working paper › Discussion paper
TY - UNPB
T1 - Country Size and Corporate Tax Rate
T2 - Rational and Empirics
AU - Azémar, Céline
AU - Desbordes, Rodolphe
AU - Wooton, Ian
PY - 2015
Y1 - 2015
N2 - This paper investigates whether the differences in corporate tax rates set by countries can be explained, in part, by the size of national home markets. We set up a simple model in which multinational firms within an industry choose where to invest, given the levels of corporation tax rates in each location. This model yields predictions with respect to the influences of the relative size of countries on the differences in corporate tax rates that should arise in equilibrium. We then test these predictions using data from 27 European Union member‐states for the period 1981‐2005. Consistent with our model, we find that large countries set higher corporate tax rates than their smaller competitors for FDI. Our rationale for the existence of this effect, the market access, withstands the test of alternative explanations.
AB - This paper investigates whether the differences in corporate tax rates set by countries can be explained, in part, by the size of national home markets. We set up a simple model in which multinational firms within an industry choose where to invest, given the levels of corporation tax rates in each location. This model yields predictions with respect to the influences of the relative size of countries on the differences in corporate tax rates that should arise in equilibrium. We then test these predictions using data from 27 European Union member‐states for the period 1981‐2005. Consistent with our model, we find that large countries set higher corporate tax rates than their smaller competitors for FDI. Our rationale for the existence of this effect, the market access, withstands the test of alternative explanations.
KW - corporate tax rate
KW - tax competition
KW - foreign direct investment (FDI)
KW - country size
UR - http://cepr.org/
M3 - Discussion paper
T3 - International Trade and Regional Economics
BT - Country Size and Corporate Tax Rate
CY - London
ER -