Country Size and Corporate Tax Rate: Rationale and Empirics
Ian Wooton (),
Rodolphe Desbordes and
Azémar, Céline
No 10800, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
This paper investigates whether the differences in corporate tax rates set by countries can be explained, in part, by the size of national home markets. We set up a simple model in which multinational firms within an industry choose where to invest, given the levels of corporation tax rates in each location. This model yields predictions with respect to the influences of the relative size of countries on the differences in corporate tax rates that should arise in equilibrium. We then test these predictions using data from 27 European Union member-states for the period 1981-2005. Consistent with our model, we find that large countries set higher corporate tax rates than their smaller competitors for FDI. Our rationale for the existence of this effect, the market access, withstands the test of alternative explanations.
Keywords: Corporate tax rate; Country size; Foreign direct investment; Tax competition (search for similar items in EconPapers)
JEL-codes: E62 F23 H25 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-acc, nep-eec, nep-eur and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://cepr.org/publications/DP10800 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Working Paper: Country Size and Corporate Tax Rate: Rationale and Empirics (2015) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10800
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10800
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().