Corporate Taxation and Productivity Catch-Up: Evidence from European firms



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Gemmell, Norman and Kneller, Richard and McGowan, Danny and Sanz, Ismael and Sanz Sanz, José Félix (2018) Corporate Taxation and Productivity Catch-Up: Evidence from European firms. Scandinavian Journal of Economics, 120 (2). pp. 372-399. ISSN 0347-0520

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In this paper, we explore whether higher corporate tax rates, because they lower the after-tax returns to productivity-enhancing investments, reduce the speed with which small firms converge to the productivity frontier. Using data for 11 European countries, we find evidence that their productivity catch-up is slower when the statutory corporate tax rates are higher. In contrast, we find that large firms are instead affected by effective marginal rates. Using the reduced-form model of productivity convergence of Griffith et al. (2009, Journal of Regional Science 49, 689–720), our results are robust to a host of robustness checks and a natural experiment that exploits the 2001 German tax reforms.

Item Type:Article
Uncontrolled Keywords:Convergence; Firms; Productivity; Taxation
Subjects:Social sciences > Economics > Economic development
Social sciences > Economics > Public economy
Social sciences > Economics > Microeconomics
Social sciences > Economics > Industrial organization
JEL:D24, H25, L11, O31
ID Code:60421
Deposited On:08 May 2020 11:02
Last Modified:13 May 2020 07:57

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