Local Corporate Taxation and Business Activity

Jacob Lundberg () and Gabriella Massenz ()
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Jacob Lundberg: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden, and UCFS, https://www.ifn.se/en/researchers/ifn-researcher/jacob-lundberg/
Gabriella Massenz: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden, and UCES and FIT, https://www.ifn.se/en/researchers/ifn-researcher/gabriella-massenz/

No 1531, Working Paper Series from Research Institute of Industrial Economics

Abstract: We use a natural experiment and administrative data to study the effect of corporate tax cuts on business activity. For identification, we exploit the abolition of municipal corporate income taxation in Sweden in 1985, which created variation in corporate tax changes faced by different municipalities. Our findings indicate an expansion of business activity and employment in large firms following a tax cut. However, we find no significant impact on these outcomes for small firms. In addition, firm entry rates increase in municipalities experiencing the largest tax cuts.

Keywords: Corporate taxation; Business activity; Employment; Firm entry (search for similar items in EconPapers)
JEL-codes: G31 G38 H21 H25 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2025-08-14
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1531

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