FDI determination and corporate tax competition in a volatile world |
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Authors: | Mauro Ghinamo Paolo M Panteghini Federico Revelli |
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Institution: | (1) Ifo Institute for Economic Research, Poschingerstrasse 5, 81679 Munich, Germany |
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Abstract: | This paper investigates the impact of economic and political volatility on corporate tax rates on a large dataset of countries
over the 1983–2003 period. Estimation of a dynamic tax rate equation supports the hypothesis that economic volatility negatively
affects statutory corporate tax rates, while political volatility has no significant effect. In order to identify the channels
through which volatility works, we estimate a structural model allowing for simultaneous determination of corporate tax rates
and FDI inflows, and find that economic volatility affects the corporate tax setting process through its impact on FDI inflows. |
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