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Effective Corporate Tax Rates and the Size Distribution of Firms

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  • Almas Heshmati
  • Dan Johansson
  • Carl Magnus Bjuggren

    ()
    (Technology Management, Economics and Policy Program(TEMEP), Seoul National University)

Abstract

We analyze the effects of effective corporate tax rates on the size distribution of firms. In modelling this relationship we account for conditional variables as well as unobservable time and industry effects. A number of hypotheses are tested concerning heterogeneity in the impact of effective corporate tax rates on the size distributions of firms with regard to firm size class, industry and time. The results are based on data covering the whole Swedish economy for the period 1973-2002. The descriptive results suggest that effective corporate tax rates differ by firm size, industry and over time. Application of t-tests demonstrate inequality in mean and variance of effective corporate tax rates between major size classes but not within major size classes: smaller firms report a higher effective corporate tax rate than larger firms. The t-tests also demonstrate inequality in mean and variance of effective corporate tax rates between industrial sectors: service sector reports a higher effective corporate tax rate than production sector. The regressions show effective corporate tax rates to have: a negative effect on the size distribution of large firms, negative effect on transportation, financing and service sector and a positive effect on manufacturing, electricity and on production sector. We conclude that effective corporate tax rates affect the size distribution of firms as well as the composition of industries.

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File URL: ftp://147.46.237.98/DP-23.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 200923.

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Length: 28 pages
Date of creation: Oct 2009
Date of revision: Nov 2009
Handle: RePEc:snv:dp2009:200923

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Keywords: composition of industries; corporate taxes; effective corporate tax rates; size distribution of firms;

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Cited by:
  1. Du Rietz, Gunnar & Johansson, Dan & Stenkula, Mikael, 2014. "A 150-year Perspective on Swedish Capital Income Taxation," HUI Working Papers, HUI Research 101, HUI Research.

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