Corporate Taxation and Productivity Catch‐Up: Evidence from European Firms

Norman Gemmell, Richard Kneller, Danny McGowan, Ismael Sanz and José F. Sanz‐Sanz

Scandinavian Journal of Economics, 2018, vol. 120, issue 2, 372-399

Abstract: In this paper, we explore whether higher corporate tax rates, because they lower the after‐tax returns to productivity‐enhancing investments, reduce the speed with which small firms converge to the productivity frontier. Using data for 11 European countries, we find evidence that their productivity catch‐up is slower when the statutory corporate tax rates are higher. In contrast, we find that large firms are instead affected by effective marginal rates. Using the reduced‐form model of productivity convergence of Griffith et al. (2009, Journal of Regional Science 49, 689–720), our results are robust to a host of robustness checks and a natural experiment that exploits the 2001 German tax reforms.

Date: 2018
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Citations: View citations in EconPapers (13)

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https://doi.org/10.1111/sjoe.12212

Related works:
Working Paper: Corporate Taxation and Productivity Catch-Up: Evidence from European Firms (2013)
Working Paper: Corporate Taxation and Productivity Catch-Up: Evidence from European firms (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:120:y:2018:i:2:p:372-399

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