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Economic integration and the relationship between profit and wage taxes

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  • Andreas Haufler
  • Alexander Klemm
  • Guttorm Schjelderup

    ()

Abstract

This paper analyses the development of the ratio of corporate taxes to wage taxes using a simple political economy model with workers and capitalists that own internationally mobile and immobile firms. Among other results, our model predicts that countries reduce their corporate tax rate, relative to the wage tax when preferences for public goods increase, or when a rising share of capital is employed in multinational firms. We further show how a rise in the wage share changes both the relative size of tax bases and the political influence of different income groups. The predicted relationships are tested using panel data for 23 OECD countries for the period 1980 through 2004. The results of the empirical analysis support our main hypotheses.

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File URL: http://hdl.handle.net/10.1007/s11127-008-9368-9
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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 138 (2009)
Issue (Month): 3 (March)
Pages: 423-446

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Handle: RePEc:kap:pubcho:v:138:y:2009:i:3:p:423-446

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Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Capital and labor taxes; Economic integration; H20; H73; F15; F23;

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References

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Citations

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Cited by:
  1. Adam, Antonis & Kammas, Pantelis & Lagou, Athina, 2011. "The effect of globalization on capital taxation: What have we learned after 20 years of empirical studies?," MPRA Paper 33382, University Library of Munich, Germany.
  2. Tobias König & Andreas Wagener, 2008. "(Post-)Materialist Attitudes and the Mix of Capital and Labour Taxation," CESifo Working Paper Series 2366, CESifo Group Munich.
  3. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers 0821, Oxford University Centre for Business Taxation.
  4. Osterloh, Steffen & Debus, Marc, 2012. "Partisan politics in corporate taxation," European Journal of Political Economy, Elsevier, vol. 28(2), pages 192-207.
  5. Janeba, Eckhard & Osterloh, Steffen, 2012. "Tax and the city: A theory of local tax competition and evidence for Germany," ZEW Discussion Papers 12-005, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Koenig, Tobias & Wagener, Andreas, 2013. "Tax structure and government expenditures with tax equity concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 137-153.
  7. Genschel, Philipp & Schwarz, Peter, 2012. "Tax competition and fiscal democracy," TranState Working Papers 161, University of Bremen, Collaborative Research Center 597: Transformations of the State.
  8. B. Merlevede & G. Rayp & S. Van Parys & T. Verbeke, 2011. "Do EU15 countries compete over labour taxes?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/750, Ghent University, Faculty of Economics and Business Administration.

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