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Killing a second bird with one stone? Promoting firm capital growth and exports through tax policy

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  • Michele Bernini
  • Tania Treibich

Abstract

Does a lower tax rate on profits promote the international activity of small and medium enterprises? This article addresses this question by exploiting a policy experiment in France. A reduction in corporate taxation is found to boost small and medium enterprises’ capital growth and export participation, but to reduce employment growth. We estimate that a 50% reduction in the statutory tax rate induces, on average, a 29% increase in capital and a 6% increase in individual firms’ probability of exporting. However, the estimated average treatment effect on the treated conceals substantial heterogeneity across firms with different initial productivity and size.

Suggested Citation

  • Michele Bernini & Tania Treibich, 2016. "Killing a second bird with one stone? Promoting firm capital growth and exports through tax policy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 25(5), pages 829-845.
    • Handle: RePEc:oup:indcch:v:25:y:2016:i:5:p:829-845.
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    File URL: http://hdl.handle.net/10.1093/icc/dtw029
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    Cited by:

    1. Federici, Daniela & Parisi, Valentino & Ferrante, Francesco, 2020. "Heterogeneous firms, corporate taxes and export behavior: A firm-level investigation for Italy," Economic Modelling, Elsevier, vol. 88(C), pages 98-112.

    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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