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The Impact of Trade and Factor Flows on Domestic Taxation

Author

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  • Ryo Takashima

    (Department of Economics, Washington & Jefferson College, U.S.A.)

Abstract

Previous empirical literature has looked at the effect of trade on capital and labor tax rates or the effect of labor flow on the labor tax rate. However, the theoretical literature suggests that both trade and factor flows can affect capital and labor tax rates simultaneously. This paper presents an empirical analysis of how domestic taxation is affected by economic integration. We find no evidence that trade and capital flows alter capital and labor tax rates. Rather, we find that increasing economic integration leads to a lower consumption tax.

Suggested Citation

  • Ryo Takashima, 2007. "The Impact of Trade and Factor Flows on Domestic Taxation," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 6(1), pages 47-62, April.
  • Handle: RePEc:ijb:journl:v:6:y:2007:i:1:p:47-62
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    References listed on IDEAS

    as
    1. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
    2. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, pages 167-190.
    3. Michael, Michael S. & Hatzipanayotou, Panos & Miller, Stephen M., 1993. "Integrated reforms of tariffs and consumption taxes," Journal of Public Economics, Elsevier, pages 417-428.
    4. Dreher, Axel, 2006. "The influence of globalization on taxes and social policy: An empirical analysis for OECD countries," European Journal of Political Economy, Elsevier, vol. 22(1), pages 179-201, March.
    5. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    6. Hatzipanayotou, Panos & Michael, Michael S. & Miller, Stephen M., 1994. "Win-win indirect tax reform : A modest proposal," Economics Letters, Elsevier, vol. 44(1-2), pages 147-151.
    7. Keen, Michael & Ligthart, Jenny E., 2002. "Coordinating tariff reduction and domestic tax reform," Journal of International Economics, Elsevier, pages 489-507.
    8. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    9. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1.
    10. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
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    More about this item

    Keywords

    economic integration; effective average tax rate; migration; capital flow;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • F15 - International Economics - - Trade - - - Economic Integration
    • F2 - International Economics - - International Factor Movements and International Business

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