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Taxes and the global allocation of capital

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  • Backus, David
  • Henriksen, Espen
  • Storesletten, Kjetil

Abstract

Despite enormous growth in international capital flows, capital-output ratios continue to exhibit substantial heterogeneity across countries. We explore the possibility that taxes, particularly corporate taxes, are a significant source of this heterogeneity. The evidence is mixed. Tax rates computed from tax revenue are inversely correlated with capital-output ratios, as we might expect. However, effective tax rates constructed from official tax rates show little relation to capital--or to revenue-based tax measures. The stark difference between these two tax measures remains an open issue.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 1 (January)
Pages: 48-61

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Handle: RePEc:eee:moneco:v:55:y:2008:i:1:p:48-61

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Web page: http://www.elsevier.com/locate/inca/505566

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