IDEAS home Printed from https://ideas.repec.org/a/bla/ecpoli/v17y2002i35p449-495.html
   My bibliography  Save this article

Corporate income tax reforms and international tax competition

Author

Listed:
  • Michael P. Devereux
  • Rachel Griffith
  • Alexander Klemm

Abstract

This paper analyses the development of taxes on corporate income in EU and G7 countries over the last two decades. We establish a number of stylized facts about their development. Tax-cutting and base-broadening reforms have had the effect that, on average across EU and G7 countries, effective tax rates on marginal investment have remained fairly stable, but those on more profitable investments have fallen. We discuss two possible explanations of these stylized facts arising from alternative forms of tax competition. First, governments may be responding to a fall in the cost of income shifting, which puts downward pressure on the statutory tax rate. Second, reforms are consistent with competition for more profitable projects, in particular those earned by multinational firms. Copyright (c) CEPR, CES, MSH, 2002.

Suggested Citation

  • Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  • Handle: RePEc:bla:ecpoli:v:17:y:2002:i:35:p:449-495
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1468-0327.00094
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert J. LaLonde, 1984. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," Working Papers 563, Princeton University, Department of Economics, Industrial Relations Section..
    2. Gerard J. van den Berg & Bas van der Klaauw, 2006. "Counseling And Monitoring Of Unemployed Workers: Theory And Evidence From A Controlled Social Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 895-936, August.
    3. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-265, April.
    4. Bertola, Giuseppe, 1999. "Microeconomic perspectives on aggregate labor markets," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 45, pages 2985-3028 Elsevier.
    5. James J. Heckman & Jeffrey A. Smith, 2004. "The Determinants of Participation in a Social Program: Evidence from a Prototypical Job Training Program," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 243-298, April.
    6. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
    7. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    8. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
    9. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
    10. Jensen, P. & Nielsen, M.S. & Rosholm, M., 1999. "The Effects of Benefits, Incentives, and Sanctions on Youth Employment," Papers 99-05, Centre for Labour Market and Social Research, Danmark-.
    11. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, pages 305-353.
    12. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
    13. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, pages 313-334.
    14. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    15. van Ours, J.C., 2000. "Do Active Labor Market Policies help Unemployed Workers to find and keep Regular Jobs," Discussion Paper 2000-10, Tilburg University, Center for Economic Research.
    16. Bell, Bell & Richard Blundell & John Van Reenen, 1999. "Getting the unemployed back to work: the role of targeted wage subsidies," IFS Working Papers W99/12, Institute for Fiscal Studies.
    17. Schmidt, Christoph M., 1999. "Persistence and the German Unemployment Problem: Empirical Evidences on German Labor Market Flows," IZA Discussion Papers 31, Institute for the Study of Labor (IZA).
    18. Michael Lechner, 2000. "An Evaluation of Public-Sector-Sponsored Continuous Vocational Training Programs in East Germany," Journal of Human Resources, University of Wisconsin Press, pages 347-375.
    19. Raaum, Oddbjorn & Torp, Hege, 2002. "Labour market training in Norway--effect on earnings," Labour Economics, Elsevier, pages 207-247.
    20. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    21. Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labour-Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 91-109, Spring.
    22. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, pages 153-161.
    23. James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, pages 85-110.
    24. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
    25. Lalive, R. & van Ours, J.C. & Zweim├╝ller, J., 2000. "The Impact of Active Labor Market Programs and Benefit Entitlement Rules on the Duration of Unemployment," Discussion Paper 2000-41, Tilburg University, Center for Economic Research.
    26. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
    27. Gary Burtless & Larry L. Orr, 1986. "Are Classical Experiments Needed for Manpower Policy," Journal of Human Resources, University of Wisconsin Press, pages 606-639.
    28. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, pages 55-74.
    29. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, pages 175-205.
    30. Daniel Friedlander & David H. Greenberg & Philip K. Robins, 1997. "Evaluating Government Training Programs for the Economically Disadvantaged," Journal of Economic Literature, American Economic Association, pages 1809-1855.
    31. Kluve, Jochen & Lehmann, Hartmut & Schmidt, Christoph M., 1999. "Active Labor Market Policies in Poland: Human Capital Enhancement, Stigmatization, or Benefit Churning?," Journal of Comparative Economics, Elsevier, pages 61-89.
    32. Michael Lechner, 2000. "An Evaluation of Public-Sector-Sponsored Continuous Vocational Training Programs in East Germany," Journal of Human Resources, University of Wisconsin Press, pages 347-375.
    33. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, pages 127-169.
    34. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume,in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
    35. Dufwenberg, Martin & Lundholm, Michael, 2001. "Social Norms and Moral Hazard," Economic Journal, Royal Economic Society, vol. 111(473), pages 506-525, July.
    36. Sianesi, Barbara, 2001. "An evaluation of the active labour market programmes in Sweden," Working Paper Series 2001:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    37. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
    38. Jaap H. Abbring & Gerard J. van den Berg, 2003. "The Nonparametric Identification of Treatment Effects in Duration Models," Econometrica, Econometric Society, pages 1491-1517.
    39. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, pages 604-620.
    40. Agell, Jonas & Persson, Mats, 2001. "On the analytics of the dynamic Laffer curve," Journal of Monetary Economics, Elsevier, pages 397-414.
    41. Bjorklund, Anders & Moffitt, Robert, 1987. "The Estimation of Wage Gains and Welfare Gains in Self-selection," The Review of Economics and Statistics, MIT Press, pages 42-49.
    42. Larsson, Laura, 2000. "Evaluation of Swedish youth labour market programmes," Working Paper Series 2000:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    43. Magnac, Thierry, 2000. "Subsidised Training and Youth Employment: Distinguishing Unobserved Heterogeneity from State Dependence in Labour Market Histories," Economic Journal, Royal Economic Society, vol. 110(466), pages 805-837, October.
    44. Schmidt, Christoph M., 1999. "The Heterogeneity and Cyclical Sensitivity of Unemployment: An Exploration of German Labor Market Flows," IZA Discussion Papers 84, Institute for the Study of Labor (IZA).
    45. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    46. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 339-360.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecpoli:v:17:y:2002:i:35:p:449-495. See general 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/cebruuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.