Corporate Taxation in Open Economies

Radek Šauer

No 9942, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes the macroeconomic impact of corporate taxation. The analysis is conducted in a quantitative two-country model. In the first step, the paper describes the long-run effects of corporate taxation. A reduction in the corporate-income tax rate increases GDP, wages, consumption, investment, and business density. The trade balance is at the same time negatively affected. Firms headquartered in a country which lowers its corporate tax become internationally less active and instead focus more on their domestic market. In the second step, the paper presents adjustment dynamics that are induced by a corporate-tax reform. The dynamic response of the economy can substantially differ when comparing shorter and longer time horizons.

Keywords: corporate taxation; macroeconomy; heterogeneous firms; multinationals; international spillovers (search for similar items in EconPapers)
JEL-codes: E62 F42 H25 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-acc, nep-int, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9942

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