, Volume 130, Issue 3-4, pp 363-380
Date: 29 Sep 2006

Does capital mobility reduce the corporate-labor tax ratio?

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Abstract

Previous empirical studies have shown that there is only a small negative (if any) effect of capital mobility on the corporate tax burden. Using data for up to 20 OECD countries in the period 1979–2000 this paper tries to investigate a less rigid hypothesis: Although capital taxes have not substantially declined in the last twenty years the relative burden of corporate to labor taxes may have fallen due to capital mobility. The results suggest that capital mobility has a weak negative impact on the corporate-labor tax ratio. Other factors however, i.e. the size of the country or the share of investment expenditures are more important in explaining the relative tax burden than capital mobility.

JEL Classification: H24, H25
I thank two anonymous referees for very useful suggestions. All remaining errors are mine.