Policy effects of international taxation on firm dynamics and capital structure

Adam Spencer ()

No 2020-25, Discussion Papers from University of Nottingham, GEP

Abstract: This paper develops a quantitative open economy framework with dynamics, firm heterogeneity and financial frictions to study the impact of corporate tax reforms targeted at multinationals. The model quantities their impact on productivity, GDP and welfare. Firms draw idiosyncratic shocks, invest in capital, choose optimal financing and select endogenously into servicing an overseas market, either through exporting or FDI. I apply this framework to the removal of the U.S. repatriation tax, an aspect of the Tax Cuts and Jobs Act. The reform's impact trades-off two selection effects more offshoring versus greater business dynamism from increased proftability. The reform leads to higher U.S. welfare and revenue neutrality. A series of exercises illustrate that the novel features of this framework have signifcant quantitative implications. The reform's beneficial effects are mitigated considerably when financial frictions are removed and it appears to be welfare reducing when using a static analogue of the model.

Keywords: dynamics; financial frictions; productivity; corporate tax; firm heterogeneity; FDI; repatriation tax (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-int and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.nottingham.ac.uk/gep/documents/papers/2020/2020-25.pdf (application/pdf)

Related works:
Journal Article: Policy Effects of International Taxation on Firm Dynamics and Capital Structure (2022)
Working Paper: Policy effects of international taxation on firm dynamics and capital structure (2020)
Working Paper: Policy Effects of International Taxation on Firm Dynamics and Capital Structure (2017)
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:not:notgep:2020-25

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, GEP School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().