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Leaning Right and Learning from the Left: Diffusion of Corporate Tax Policy in the OECD

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  • Nathan M. Jensen Washington University, Rene Lindstadt, Trinity College Dublin

Abstract

There is an increased focus in comparative politics and international relations on how choices of national governments are dependent on choices made by governments in other countries. We argue that while the relationship between policy choices across countries is often labeled as either diffusion or competition, in many cases the theoretical mechanisms underpinning these labels are unclear. In this paper we build a model of social learning with a specific application to the diffusion of corporate tax reductions. This model yields predictions that are differentiable from existing models of tax competition. Specifically, we argue that social learning is most likely to take place in the wake of tax policy cuts by left governments. We test this model using an existing data set of corporate tax rate changes and an author-created data set of changes in tax legislation, covering twenty OECD countries from 1980-1998.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp290.

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Date of creation: 05 2009
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Handle: RePEc:iis:dispap:iiisdp290

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  1. Nooruddin, Irfan & Simmons, Joel W., 2006. "The Politics of Hard Choices: IMF Programs and Government Spending," International Organization, Cambridge University Press, vol. 60(04), pages 1001-1033, October.
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  4. Lee, Chang Kil & Strang, David, 2006. "The International Diffusion of Public-Sector Downsizing: Network Emulation and Theory-Driven Learning," International Organization, Cambridge University Press, vol. 60(04), pages 883-909, October.
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  9. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
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  12. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
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  22. Simmons, Beth A. & Dobbin, Frank & Garrett, Geoffrey, 2006. "Introduction: The International Diffusion of Liberalism," International Organization, Cambridge University Press, vol. 60(04), pages 781-810, October.
  23. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
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