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Corporate taxes and multi-product exporters: Theory and evidence from trade dynamics

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  • Flach, Lisandra
  • Irlacher, Michael
  • Unger, Florian

Abstract

This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties. We estimate the effects of corporate taxes on trade dynamics by exploiting policy reforms in 42 destination countries of exports during the period 2005–2012. Our results provide strong support for competitive effects of corporate taxation.

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  • Flach, Lisandra & Irlacher, Michael & Unger, Florian, 2021. "Corporate taxes and multi-product exporters: Theory and evidence from trade dynamics," Journal of International Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:inecon:v:132:y:2021:i:c:s0022199621000957
    DOI: 10.1016/j.jinteco.2021.103515
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    2. Jackie M.L. Chan & Michael Irlacher & Michael Koch, 2022. "Multiproduct Mergers and the Product Mix in Domestic and Foreign Markets," CESifo Working Paper Series 9722, CESifo.
    3. Michael Irlacher, 2022. "Multi-product Firms in International Economics," Economics working papers 2022-01, Department of Economics, Johannes Kepler University Linz, Austria.
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    More about this item

    Keywords

    Multi-product firms; Corporate taxation; Exporter dynamics; International trade;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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