Corporate Taxation and Productivity Catch-Up: Evidence from European firms
AbstractFirms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.
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 Victoria University of Wellington, Chair in Public Finance in its series Working Paper Series with number 2705.
Date of creation: 2013
Date of revision:
Contact details of provider:
Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
More information through EDIRC
Productivity; taxation; convergence;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-04-20 (Accounting & Auditing)
- NEP-ALL-2013-04-20 (All new papers)
- NEP-EFF-2013-04-20 (Efficiency & Productivity)
- NEP-EUR-2013-04-20 (Microeconomic European Issues)
- NEP-PBE-2013-04-20 (Public Economics)
- NEP-SBM-2013-04-20 (Small Business Management)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services).
If references are entirely missing, you can add them using this form.