Globalization and Taxation: Theory and Evidence

Priya Ranjan () and Giray Gözgör
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Priya Ranjan: Department of Economics, University of California-Irvine
Authors registered in the RePEc Author Service: Priyaranjan Jha

No 181903, Working Papers from University of California-Irvine, Department of Economics

Abstract: We construct a theoretical model to capture the compensation and efficiency effects of globalization in a set up where the redistributive tax rate is chosen by the median voter. The model predicts that the two alternative modes of globalization- trade liberalization and financial openness- could potentially have different effects on taxation. We then provide some empirical evidence on the relationship between taxation and the alternative modes of globalization using a large cross-country panel dataset. We make a distinction between de jure and de facto measures of globalization and find a robust negative relationship between de jure measures financial openness and tax rates. There is no robust relationship between de facto measures of finanical openness and taxation. As well, the relationship between trade liberalization (both de jure and de facto measures) and tax rates is not robust and depends on the measures of taxation as well as the time period of analysis.

Keywords: Trade liberalization; capital market openness; redistributive taxation; median voter (search for similar items in EconPapers)
JEL-codes: F11 F21 F68 H11 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2018-08
New Economics Papers: this item is included in nep-acc, nep-int, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Globalization and taxation: Theory and evidence (2019)
Working Paper: Globalization and taxation: theory and evidence (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:181903

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