Corporate Tax Policy and Unemployment in Europe: An Applied General Equilibrium Analysis
AbstractThis paper analyzes the impact of corporate taxes on structural unemployment, using an applied general equilibrium model for the European Union. We find that the unemployment and welfare effects of corporate taxes differ considerably among European countries. The magnitude of these effects rise in particular in the broadness of the corporate tax base of a country, and the strength of international spillover effects through foreign direct investment. The effect on unemployment is smaller if the substitution elasticity between labour and capital is large, if international spillover effects operate primarily via multinational profit shifting, and if equilibrium forces on the labour market are strong. Although the effect of corporate taxes on unemployment may be smaller than the effect of labour and value-added taxes (e.g. under relatively strong real wage resistance), the welfare costs of corporate taxation are typically larger for most European countries under plausible parameters, especially under strong international spillovers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-056/2.
Date of creation: 23 Jul 2007
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
Corporate Tax; Structural Unemployment; Applied General Equilibrium; European Union;
Other versions of this item:
- Leon Bettendorf & Albert van der Horst & Ruud A. de Mooij, 2009. "Corporate Tax Policy and Unemployment in Europe: An Applied General Equilibrium Analysis," The World Economy, Wiley Blackwell, vol. 32(9), pages 1319-1347, 09.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-14 (All new papers)
- NEP-EEC-2007-08-14 (European Economics)
- NEP-PUB-2007-08-14 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leon Bettendorf & Joeri Gorter & Albert van der Horst, 2006. "Who benefits from tax competition in the European Union?," CPB Document 125, CPB Netherlands Bureau for Economic Policy Analysis.
- Neary, J.P & Roberts, K.W.S, 1978.
"The Theory of Household Behaviour under Rationing,"
The Warwick Economics Research Paper Series (TWERPS)
132, University of Warwick, Department of Economics.
- Michiel Evers & Ruud A. De Mooij & Daniel J. Van Vuuren, 2005.
"What Explains the Variation in Estimates of Labour Supply Elasticities?,"
CESifo Working Paper Series
1633, CESifo Group Munich.
- Michiel Evers & Ruud de Mooij & Daniel van Vuuren, 2005. "What explains the variation in estimates of labour supply elasticities?," CPB Discussion Paper 51, CPB Netherlands Bureau for Economic Policy Analysis.
- Michiel Evers & Ruud A. de Mooij & Daniel J. van Vuuren, 2006. "What explains the Variation in Estimates of Labour Supply Elasticities?," Tinbergen Institute Discussion Papers 06-017/3, Tinbergen Institute.
- Francesco Daveri & Guido Tabellini, 2000.
"Unemployment, growth and taxation in industrial countries,"
CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
- Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
- Martin Finkenzeller & Christoph Spengel, 2004. "Measuring the Effective Levels of Company Taxation in the New Member States: A Quantitative Analysis," Taxation Papers 7, Directorate General Taxation and Customs Union, European Commission, revised Dec 2004.
- Leon Bettendorf & Albert van der Horst, 2006. "Documentation of CORTAX," CPB Memorandum 161, CPB Netherlands Bureau for Economic Policy Analysis.
- Michael Devereux, 2004. "Debating Proposed Reforms of the Taxation of Corporate Income in the European Union," International Tax and Public Finance, Springer, vol. 11(1), pages 71-89, January.
- Graafland, J.J. & Huizinga, F.H., 1998. "Taxes and benefits in a non-linear wage equation," MPRA Paper 21076, University Library of Munich, Germany.
- Broer, D.P. & Draper, D.A.G. & Huizinga, F.H., 2000. "The equilibrium rate of unemployment in the Netherlands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-383721, Tilburg University.
- P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR & CES & MSH, vol. 12(25), pages 221-264, October.
- Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 449-495, October.
- Sorensen, Peter Birch, 2004. "International tax coordination: regionalism versus globalism," Journal of Public Economics, Elsevier, vol. 88(6), pages 1187-1214, June.
- Leon Bettendorf & Albert Van Der Horst & Ruud A. De Mooij & Hendrik Vrijburg, 2010.
"Corporate Tax Consolidation and Enhanced Cooperation in the European Union,"
Institute for Fiscal Studies, vol. 31(4), pages 453-479, December.
- Leon Bettendorf & Albert van der Horst & Ruud A. de Mooij & Hendrik Vrijburg, 2010. "Corporate tax consolidation and enhanced coorporation in the European Union," Working Papers 1001, Oxford University Centre for Business Taxation.
- Leon Bettendorf & Albert van der Horst & Ruud de Mooij & Hendrik Vrijburg, 2009. "Corporate tax consolidation and enhanced cooperation in the European Union," CPB Discussion Paper 132, CPB Netherlands Bureau for Economic Policy Analysis.
- Ruud de Mooij & M.P. Devereux, 2009.
"An applied analysis of ACE and CBIT reform in the EU,"
CPB Discussion Paper
128, CPB Netherlands Bureau for Economic Policy Analysis.
- Ruud Mooij & Michael Devereux, 2011. "An applied analysis of ACE and CBIT reforms in the EU," International Tax and Public Finance, Springer, vol. 18(1), pages 93-120, February.
- Ruud de Mooij & Michael P. Devereux, 2009. "Alternative Systems of Business Tax in Europe: An applied analysis of ACE and CBIT Reforms," Taxation Papers 17, Directorate General Taxation and Customs Union, European Commission.
- Ruud de Mooij & Michael P. Devereux, 2009. "Alternative Systems of Business Tax in Europe: An applied analysis of ACE and CBIT Reforms," Taxation Studies 0028, Directorate General Taxation and Customs Union, European Commission.
- Eduardo Lora & Deisy Johanna Fajardo, 2012. "Employment and Taxes in Latin America: An Empirical Study of the Effects of Payroll, Corporate Income and Value-Added Taxes on Labor Outcomes," Research Department Publications 4791, Inter-American Development Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.