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Growth in a Globalised Economy: The Effects of Capital Taxes and Tax Competition

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Abstract

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analysed mechanism includes two different steps and considers the critical points of both the theoretical and empirical studies in this field. In particular, the estimation problems of omitted variables and parameter heterogeneity are addressed. Using panel data for a sample of 12 OECD countries in the time period 1967-1996, it is shown that the theoretical predictions can be corroborated by empirical results.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 03/24.

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Length: 18 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:eth:wpswif:03-24

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Keywords: Trade and Growth; Tax Competition; OECD Countries;

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  1. Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 885, C.E.P.R. Discussion Papers.
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  3. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, Elsevier, vol. 4(1), pages 49-53, February.
  4. Francisco Rodriguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338 National Bureau of Economic Research, Inc.
  5. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 39(1), pages 31-57, July.
  6. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  7. Jonathan Eaton & Samuel Kortum, 2001. "Technology, Trade, and Growth: A Unified Fremework," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series, Boston University - Department of Economics dp-110, Boston University - Department of Economics.
  8. Duane Swank, 1998. "Funding the Welfare State: Globalization and the Taxation of Business in Advanced Market Economies," Political Studies, Political Studies Association, Political Studies Association, vol. 46(4), pages 671-692, 09.
  9. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(1), pages 112-156, March.
  10. Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc.
  11. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  12. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(1), pages 162-74, February.
  13. Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
  14. Uhlig, Harald & Yanagawa, Noriyuki, 1996. "Increasing the capital income tax may lead to faster growth," European Economic Review, Elsevier, Elsevier, vol. 40(8), pages 1521-1540, November.
  15. Garrett, Geoffrey, 1995. "Capital mobility, trade, and the domestic politics of economic policy," International Organization, Cambridge University Press, Cambridge University Press, vol. 49(04), pages 657-687, September.
  16. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, Elsevier, vol. 74(2), pages 171-190, November.
  17. repec:fth:bosecd:110 is not listed on IDEAS
  18. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 379-399, June.
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