Journal of Industry, Competition and Trade

, Volume 10, Issue 3–4, pp 297–317 | Cite as

Effective Corporate Tax Rates and the Size Distribution of Firms

  • Almas Heshmati
  • Dan Johansson
  • Carl Magnus Bjuggren
Article

Abstract

We analyze the effects of effective corporate tax rates on the size distribution of firms. In modelling this relationship we account for conditional variables as well as unobservable time and industry effects. A number of hypotheses are tested concerning heterogeneity in the impact of effective corporate tax rates on the size distributions of firms with regard to firm size class, industry and time. The results are based on data covering the whole Swedish economy for the period 1973–2002. The descriptive results suggest that effective corporate tax rates differ by firm size, industry and over time. Application of t-tests demonstrate inequality in mean and variance of effective corporate tax rates between major size classes but not within major size classes: smaller firms report a higher effective corporate tax rate than larger firms. The t-tests also demonstrate inequality in mean and variance of effective corporate tax rates between industrial sectors: service sector reports a higher effective corporate tax rate than production sector. The regressions show effective corporate tax rates to have: a negative effect on the size distribution of large firms, negative effect on transportation, financing and service sector and a positive effect on manufacturing, electricity and on production sector. We conclude that effective corporate tax rates affect the size distribution of firms as well as the composition of industries.

Keywords

composition of industries corporate taxes effective corporate tax rates size distribution of firms 

JEL Classification

D21 H25 H32 L11 

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Almas Heshmati
    • 1
  • Dan Johansson
    • 2
  • Carl Magnus Bjuggren
    • 3
  1. 1.Department of Food and Resource Economics, College of Life Sciences and BiotechnologyKorea UniversitySeoulKorea
  2. 2.The Ratio InstituteStockholmSweden
  3. 3.Department of Management and EngineeringLinköping UniversityLinköpingSweden

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