Global Corporate Income Tax Competition, Knowledge Spillover, and Growth

Noritaka Maebayashi and Keiichi Morimoto

MPRA Paper from University Library of Munich, Germany

Abstract: In a two-country model of endogenous growth with international knowledge spillover, corporate income tax competition reproduces the second-best allocation attained by tax harmonization, despite complex externalities. This stems from the positive spillover effect across the border and free trading by Ricardian households in the global financial market. However, such a neutrality result does not hold in the extended model, which includes non-Ricardian households. The equilibrium tax rate under the corporate income tax competition can be excessively high or low, depending on the elasticity of the spillover effect to the share of the firms’ locations.

Keywords: corporate income tax; tax competition; spillover; welfare; economic growth; non- Ricardian household (search for similar items in EconPapers)
JEL-codes: E62 F23 F42 H21 H54 (search for similar items in EconPapers)
Date: 2022-04-08
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112781

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