Economic integration and the optimal corporate tax structure with heterogeneous firms

• 成果类型: Article
• 署名作者: Bauer, Christian; Davies, Ronald B.; Haufler, Andreas
• 署名单位: University of Munich; University College Dublin; University of Munich
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2013.12.001
• 发表日期: 2014
• 页码: 42-56
• 关键词: Corporate tax reform; trade liberalization; firm heterogeneity

摘要

This paper links recent tax-rate-cut-cum-base-broadening reforms of corporate taxation to the closer integration of international trade. We study the corporate tax structure in a small open economy with heterogeneous firms, in a setting where it is optimal to subsidize capital inputs by granting a tax allowance in excess of the true costs of capital. Economic integration reduces the optimal capital subsidy and drives low-productivity firms from the small country's home market, replacing them with high-productivity exporters from abroad. This endogenous policy response creates a selection effect that increases the average productivity of home firms when trade barriers fall, in addition to the well-known direct effects. (C) 2013 Elsevier B.V. All rights reserved.