Corporate Tax Policy and Industry Location with Fully Endogenous Productivity Growth

Colin Davis and Ken-ichi Hashimoto

No 1527, Discussion Papers from 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.

Keywords: National Corporate Tax Policy; Fully Endogenous Productivity Growth; Monopoly Power; Industry Concentration (search for similar items in EconPapers)
JEL-codes: F43 O30 O40 R12 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2015-07
New Economics Papers: this item is included in nep-acc, nep-ino, nep-pbe and nep-ure
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http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2015/1527.pdf (application/pdf)

Related works:
Journal Article: CORPORATE TAX POLICY AND INDUSTRY LOCATION WITH FULLY ENDOGENOUS PRODUCTIVITY GROWTH (2018)
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