Taxes and the global allocation of capital

David Backus, Espen Henriksen and Kjetil Storesletten

Journal of Monetary Economics, 2008, vol. 55, issue 1, 48-61

Abstract: Despite enormous growth in international capital flows, capital-output ratios continue to exhibit substantial heterogeneity across countries. We explore the possibility that taxes, particularly corporate taxes, are a significant source of this heterogeneity. The evidence is mixed. Tax rates computed from tax revenue are inversely correlated with capital-output ratios, as we might expect. However, effective tax rates constructed from official tax rates show little relation to capital--or to revenue-based tax measures. The stark difference between these two tax measures remains an open issue.

Date: 2008
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Working Paper: Taxes and the Global Allocation of Capital (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:55:y:2008:i:1:p:48-61

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