The Role of Corporate Taxation in a Large Welfare State

Christian Keuschnigg

University of St. Gallen Department of Economics working paper series 2009 from Department of Economics, University of St. Gallen

Abstract: In comparing the impact of corporate taxation and social insurance on foreign direct investment (FDI) and unemployment, the paper derives four main results: (i) the optimal size of the welfare state depends on the degree of risk-aversion, the unemployment rate and the excess burden of labor taxes. Unemployment partly reflects the country's exposure to globalization; (ii) corporate taxation and social insurance can have equivalent effects on unemployment and outbound FDI; (iii) while an increase in the corporate tax raises corporate tax revenue, it is likely to worsen total fiscal stance; (iv) a corporate tax should be used to contribute to welfare state financing only in exceptional cases.

Keywords: Corporate tax; foreign direct investment; unemployment; welfare state (search for similar items in EconPapers)
JEL-codes: F21 H21 H53 J64 J65 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2009-08
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: The Role of Corporate Taxation in a Large Welfare State (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2009:2009-23

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