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Corporate tax competition and innovation: An inverted-U relationship

Author

Listed:
  • Xiaoyang Zhu

    (Wichita State University)

Abstract

This paper studies how the downward corporate tax rate affects firms' innovations. Using a cross-country firm-level panel, we find that both higher and lower corporate income-tax could hinder firm innovations, which implies an inverted-U relationship between the statutory corporate income-tax rate and firm innovation. A potential explanation of nonlinearity is that a lower tax rate alters the market structure.

Suggested Citation

  • Xiaoyang Zhu, 2022. "Corporate tax competition and innovation: An inverted-U relationship," Economics Bulletin, AccessEcon, vol. 42(2), pages 447-457.
    • Handle: RePEc:ebl:ecbull:eb-21-00626
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    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I2-P39.pdf
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    More about this item

    Keywords

    Corporate income tax; Firm innovation; Market competition;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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