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Author Exbrayat, Nelly ♦ Geys, Benny
Source Hyper Articles en Ligne (HAL)
Content type Text
File Format PDF
Language English
Subject Keyword Tax competition ♦ Trade integration ♦ New Economic Geography ♦ Tax differentials ♦ shs ♦ Humanities and Social Sciences/Economies and finances
Abstract Building on recent contributions to the New Economic Geography literature, this paper analyses the relation between asymmetric market size, trade integration and business income tax differentials across countries. First, relying on a foot-loose capital model of tax competition, we illustrate that trade integration (or decreasing trade costs) reduces the importance of relative market size for differences in the extent of corporate taxation between countries. Then, using a dataset of 26 OECD countries over the period 1982-2004, we provide supportive evidence of these theoretical predictions: i.e., market size differences are strongly positively correlated with corporate income tax differences across countries but, crucially, trade integration weakens this link. These findings are obtained controlling for the potential endogeneity of trade integration and are robust to various alternative specifications and robustness checks.
Educational Use Research
Learning Resource Type Article
Publisher Date 2011-01-01