Taxes, Mobile Capital, and Economic Dynamics in a Globalising World

Abstract

This contribution provides evidence for the hypothesis that trade increases growth through its curbing effect on capital taxes. The analysed trade-growth channel includes a negative impact of open- ness on corporate taxes and a negative effect of taxes on growth. The paper explores the two steps theoretically and empirically, taking into account the critical points of recent studies in this field. Estimations with panel data for a sample of 12 OECD countries in the period 1965-1999 confirm a significant and robust impact of trade on growth through corporate taxes.Trade and Growth, Tax Competition, Capital Taxes and Mobility, OECD Countries