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Corporate Tax Policy and Industry Location with Fully Endogenous Productivity Growth

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  • Colin Davis

    (The Institute for the Liberal Arts, Doshisha University)

  • Ken-ichi Hashimoto

    (Graduate School of Economics, Kobe University)

Abstract

This papers considers how national corporate tax policy affects productivity growth through adjustments in geographic patterns of industry in a two-country model of trade. With trade costs and imperfect knowledge spillovers between countries, production concentrates partially and innovation concentrates fully in the country with the lowest tax rate. When firms have weak (strong) monopoly power, a decrease in the tax rate of the low-tax-rate country depresses (accelerates) productivity growth. The paper also investigates the relationship between relative tax rates and the level of product variety, and analytically characterizes the effects of changes in tax policy on national welfare.

Suggested Citation

  • Colin Davis & Ken-ichi Hashimoto, 2015. "Corporate Tax Policy and Industry Location with Fully Endogenous Productivity Growth," Discussion Papers 1527, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1527
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    Cited by:

    1. Maebayashi, Noritaka & Morimoto, Keiichi, 2022. "Global Corporate Income Tax Competition, Knowledge Spillover, and Growth," MPRA Paper 112790, University Library of Munich, Germany.
    2. Daniel Balsalobre-Lorente & Ayoub Zeraibi & Khurram Shehzad & José María Cantos-Cantos, 2021. "Taxes, R&D Expenditures, and Open Innovation: Analyzing OECD Countries," JOItmC, MDPI, vol. 7(1), pages 1-12, January.
    3. Maebayashi, Noritaka & Morimoto, Keiichi, 2022. "Global Corporate Income Tax Competition, Knowledge Spillover, and Growth," MPRA Paper 112781, University Library of Munich, Germany.

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    More about this item

    Keywords

    National Corporate Tax Policy; Fully Endogenous Productivity Growth; Monopoly Power; Industry Concentration;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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