IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Economic integration and the relationship between profit and wage taxes

Listed author(s):
  • Andreas Haufler
  • Alexander Klemm
  • Guttorm Schjelderup

    ()

This paper analyses the development of the ratio of corporate taxes to wage taxes using a simple political economy model with workers and capitalists that own internationally mobile and immobile firms. Among other results, our model predicts that countries reduce their corporate tax rate, relative to the wage tax when preferences for public goods increase, or when a rising share of capital is employed in multinational firms. We further show how a rise in the wage share changes both the relative size of tax bases and the political influence of different income groups. The predicted relationships are tested using panel data for 23 OECD countries for the period 1980 through 2004. The results of the empirical analysis support our main hypotheses.

(This abstract was borrowed from another version of this item.)

If 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.

File URL: http://hdl.handle.net/10.1007/s11127-008-9368-9
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Public Choice.

Volume (Year): 138 (2009)
Issue (Month): 3 (March)
Pages: 423-446

as
in new window

Handle: RePEc:kap:pubcho:v:138:y:2009:i:3:p:423-446
DOI: 10.1007/s11127-008-9368-9
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/public+finance/journal/11127/PS2

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Hotte, Louis & Winer, Stanley L, 2001. "Political Influence, Economic Interests and Endogenous Tax Structure in a Computable Equilibrium Framework: With Application to the United States, 1973 and 1983," Public Choice, Springer, vol. 109(1-2), pages 69-99, October.
  2. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
  3. Wilson, John Douglas, 1991. "Tax competition with interregional differences in factor endowments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 423-451, November.
  4. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078.
  5. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  6. Peter Schwarz, 2007. "Does capital mobility reduce the corporate-labor tax ratio?," Public Choice, Springer, vol. 130(3), pages 363-380, March.
  7. Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2008. "The impact of globalization on the composition of government expenditures: Evidence from panel data," Public Choice, Springer, vol. 134(3), pages 263-292, March.
  8. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2006. "Globalisation and the Mix of Wage and Profit Taxes," CESifo Working Paper Series 1678, CESifo Group Munich.
  9. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  10. 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.
  11. Atish R. Ghosh & Holger C. Wolf, 1997. "Geographical and Sectoral Shocks in the U.S. Business Cycle," NBER Working Papers 6180, National Bureau of Economic Research, Inc.
  12. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 689-701.
  13. Jimeno, Juan F., 1992. "The relative importance of aggregate and sector-specific shocks at explaining aggregate and sectoral fluctuations," Economics Letters, Elsevier, vol. 39(4), pages 381-385, August.
  14. Slemrod, Joel, 2004. "Are corporate tax rates, or countries, converging?," Journal of Public Economics, Elsevier, vol. 88(6), pages 1169-1186, June.
  15. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
  16. Bretschger, Lucas & Hettich, Frank, 2002. "Globalisation, capital mobility and tax competition: theory and evidence for OECD countries," European Journal of Political Economy, Elsevier, vol. 18(4), pages 695-716, November.
  17. 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.
  18. Kind, Hans Jarle & Midelfart, Karen Helene & Schjelderup, Guttorm, 2005. "Corporate tax systems, multinational enterprises, and economic integration," Journal of International Economics, Elsevier, vol. 65(2), pages 507-521, March.
  19. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers W03/03, Institute for Fiscal Studies.
  20. Signe Krogstrup, 2004. "Are Corporate Tax Burdens Racing to the Bottom in the European Union?," EPRU Working Paper Series 04-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  21. Clemens Fuest & Bernd Huber, 2001. "Tax Competition and Tax Coordination in a Median Voter Model," Public Choice, Springer, vol. 107(1), pages 97-113, April.
  22. Davis, Steven J & Henrekson, Magnus, 1999. "Explaining National Differences in the Size and Industry Distribution of Employment," Small Business Economics, Springer, vol. 12(1), pages 59-83, February.
  23. Hettich, W. & Winer, S.L., 1993. "The Political Economy of Taxation," Papers 8, Carleton - Business Administration.
  24. Apolte, Thomas, 2001. "How Tame Will Leviathan Become in Institutional Competition? Competition among Governments in the Provision of Public Goods," Public Choice, Springer, vol. 107(3-4), pages 359-381, June.
  25. Harry Garretsen & Jolanda Peeters, 2007. "Capital Mobility, Agglomeration and Corporate Tax Rates: Is the Race to the Bottom for Real?," CESifo Economic Studies, CESifo, vol. 53(2), pages 263-293, June.
  26. Johannes Becker & Clemens Fuest, 2010. "Internationalization and business tax revenue—evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(2), pages 174-192, April.
  27. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, 03.
  28. Michael P Devereux, 2007. "The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence," Working Papers 0702, Oxford University Centre for Business Taxation.
  29. Lawrence Kenny & Stanley Winer, 2006. "Tax Systems in the World: An Empirical Investigation into the Importance of Tax Bases, Administration Costs, Scale and Political Regime," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(2), pages 181-215, May.
  30. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
  31. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  32. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:138:y:2009:i:3:p:423-446. 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: (Sonal Shukla)

or (Rebekah McClure)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.