Taxes and the Global Allocation of Capital

David Backus, Espen Henriksen and Kjetil Storesletten

No 13624, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E22 F21 H25 H32 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-acc, nep-mac, nep-pbe and nep-pub
Note: IFM PE
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Citations: View citations in EconPapers (8)

Published as Backus, David & Henriksen, Espen & Storesletten, Kjetil, 2008. "Taxes and the global allocation of capital," Journal of Monetary Economics, Elsevier, vol. 55(1), pages 48-61, January.

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