Asymmetric Trade Estimator in Modified Gravity: Corporate Tax Rates and Trade in OECD Countries
To study the potentially distortionary impact of differing corporate income tax rates on international trade flows, we use an augmented empirical specification of the gravity model. Incorporating an asymmetric trade barrier measure into a modified gravity model, we capture the impact of corporate income tax rates via the price mechanism impact on trade. Holding other factors constant in a gravity model, one should theoretically expect asymmetric corporate income tax rates to impact bilateral trade flows. High (low) tax states have an implied price (dis)advantage relative to trade partners. However, gravity models have explicitly assumed that trade barriers are symmetric between countries. Using asymmetric trade barrier measures of corporate income tax rates differences between countries, we find that bilateral corporate income tax rates wedges do not impact bilateral international trade flows. Our empirical results are robust to alternative proxies for tax asymmetries and exclusion restrictions based on trade regions and time periods.
|Date of creation:||Apr 2013|
|Contact details of provider:|| Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720|
Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page: http://www.cefir.ru
More information through EDIRC
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.:
- Mihir A. Desai & James R. Hines Jr., 2001.
"Foreign Direct Investment in a World of Multiple Taxes,"
NBER Working Papers
8440, National Bureau of Economic Research, Inc.
- Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, vol. 88(12), pages 2727-2744, December.
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- Michael Overesch & Johannes Rincke, 2011.
"What Drives Corporate Tax Rates Down? A Reassessment of Globalization, Tax Competition, and Dynamic Adjustment to Shocks,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 113(3), pages 579-602, 09.
- Michael Overesch & Johannes Rincke, 2009. "What Drives Corporate Tax Rates Down? A Reassessment of Globalization, Tax Competition, and Dynamic Adjustment to Shocks," CESifo Working Paper Series 2535, CESifo Group Munich.
- Lionel Fontagné & Michaël Pajot, 1997. "How Foreign Direct Investment Affects International Trade and Competitiveness: an Empirical Assessment," Working Papers 1997-17, CEPII research center.
- Görg, Holger & Molana, Hassan & Montagna, Catia, 2009.
"Foreign direct investment, tax competition and social expenditure,"
International Review of Economics & Finance,
Elsevier, vol. 18(1), pages 31-37, January.
- Holger Görg, & Hassan Molana, & Catia Montagna, "undated". "Foreign Direct Investment, Tax Competition and Social Expenditure," Discussion Papers 07/03, University of Nottingham, GEP.
- Holger Görg & Hassan Molana & Catia Montagna, 2007. "Foreign Direct Investment, Tax Competition and Social Expenditure," Dundee Discussion Papers in Economics 198, Economic Studies, University of Dundee.
- Kei-Mu Yi, 2000.
"Can vertical specialization explain the growth of world trade?,"
96, Federal Reserve Bank of New York.
- Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
- 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.
- Ben Ferrett & Ian Wooton, 2010.
"Competing for a duopoly: international trade and tax competition,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 43(3), pages 776-794, August.
- Ferrett, Ben & Wooton, Ian, 2005. "Competing for a Duopoly: International Trade and Tax Competition," CEPR Discussion Papers 5379, C.E.P.R. Discussion Papers.
- Mihir A. Desai & C. Fritz Foley & James R. Hines, 2009. "Domestic Effects of the Foreign Activities of US Multinationals," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 181-203, February.
- Mihir A. Desai & Dhammika Dharmapala, 2009.
"Dividend Taxes and International Portfolio Choice,"
0911, Oxford University Centre for Business Taxation.
- Kevin S. Markle & Douglas A. Shackelford, 2011. "Cross-Country Comparisons of Corporate Income Taxes," NBER Working Papers 16839, National Bureau of Economic Research, Inc.
- Roger Gordon & Laura Kalambokidis & Joel Slemrod, 2003. "A New Summary Measure of the Effective Tax Rate on Investment," NBER Working Papers 9535, National Bureau of Economic Research, Inc.
- Swenson, Deborah L., 1994. "The impact of U.S. tax reform on foreign direct investment in the United States," Journal of Public Economics, Elsevier, vol. 54(2), pages 243-266, June.
- Michael Keen & Murtaza H Syed, 2006. "Domestic Taxes and International Trade; Some Evidence," IMF Working Papers 06/47, .
- Melvin, James R, 1979. "Short-Run Price Effects of the Corporate Income Tax and Implications for International Trade," American Economic Review, American Economic Association, vol. 69(5), pages 765-774, December.
When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0200. 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: (Julia Babich)
If references are entirely missing, you can add them using this form.