Do Corporate Taxes Reduce Productivity and Investment at the Firm Level? Cross-Country Evidence from the Amadeus Dataset

Jens Arnold () and Cyrille Schwellnus

Working Papers from CEPII research center

Abstract: This paper uses a stratified sample of firms across OECD economies over the period 1996-2004 to analyse the effects of corporate taxes on productivity and investment. Applying a differences-in-differences estimation strategy which exploits differential effects of corporate taxes on firms with different profitability, it is found that corporate taxes have a negative effect on productivity at the firm level. The effect is negative across firms of different size and age classes except for the small and young, which may be attributable to the relatively low profitability of small and young firms. The negative effect of corporate taxes is particularly pronounced for firms that are catching up with the technological frontier. In the investment analysis, the results suggest that corporate taxes reduce investment through an increase in the user cost of capital. This may partly explain the negative productivity effects of corporate taxes if new capital goods embody technological change.

Keywords: Productivity; Growth; Corporate income tax; Firm level data; Fiscal policy (search for similar items in EconPapers)
JEL-codes: D21 D24 E22 E62 H25 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-bec, nep-eff, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Working Paper: Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-Country Evidence from the Amadeus Dataset (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2008-19

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