 Multinational production and corporate taxes: A quantitative assessmentZi Wang Journal of International Economics, 2020, vol. 126, issue C Abstract: I study the welfare implications of corporate taxation in the presence of multinational production (MP) to understand the consequences of international tax competition and cooperation. I build a quantifiable general equilibrium model with trade, MP, and salient features of international corporate tax system. The model delivers structural equations that can be used to estimate the key parameters governing the response of firms' production locations to changes in corporate tax rates. Calibrating the model to data on 28 countries, I find that the U.S. corporate tax reform in 2017 increases the U.S. real income by about 1% but decreases the average real income of other countries by 0.075%. In a non-cooperative tax game, each country has strong incentives to lower its corporate tax rate on domestic firms in order to gain from firm relocation at the expense of other countries, which leads to welfare losses in participation countries. International tax cooperation can increase the real income in each participation country by about 1%. Keywords: Multinational production; Corporate tax; Tax competition; Tax cooperation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:126:y:2020:i:c:s0022199620300696 DOI: 10.1016/j.jinteco.2020.103353 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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