Corporate taxation and exports

Federici, Daniela and Parisi, Valentino (2012): Corporate taxation and exports.

Abstract

The paper analyses the relationship between corporate taxes and exports at firm level. We use an integrated dataset that combines, for the period 2004-2006, survey data(Indagine sulle Imprese Manifatturiere) and company accounts for the manufacturing sector to estimate a Probit and a Tobit model. Our results suggest that export participation as well as export intensity increase with corporate taxation. Consistently with recent developments of the corporate tax incidence theory, this finding can be traced out to the greater ability of exporting firms to shift the tax burden on international markets, compared to domestic firms. Calculation of the average and marginal corporate tax rates uses the methodology recently developed by Egger et al. (2009) which allows deriving firm-specific effective corporate tax rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate taxation, exports, effective tax rates
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm

References

Auerbach A. J. (2005), “Who Bears the Corporate Tax? A Review of What We Know”, NBER Working Papers w/11686.

Benfratello L., F. Schiantarelli and A. Sembenelli (2008), “Banks and innovation: micro-econometric evidence on Italian firms”, Journal of Financial Economics 90 (2), 197-217.

Bernard, A. B. and J. B. Jensen (1995) "Exporters, Jobs, and Wages in U.S. Manufacturing: 1976-1987", Brookings Papers on Economic Activity: Microeconomics, 67-119.

Bernard, A. B. and J. B. Jensen (1999), "Exceptional Exporter Performance: Cause, Effect or Both?", Journal of International Economics, 47(1), 1-25.

Bernard, A. and J. B. Jensen (2004), “Why Some Firms Export”, Review of Economics and Statistics 86,561-69.

Bernard, A. B., J. B. Jensen, S. J. Redding and P. Schott (2007), "Firms in International Trade," The Journal of Economic Perspectives, 21(3), 105-30.

Boadway, R and N. Bruce (1984), “A General Proposition on the Design of a Neutral Business Tax”, Journal of Public Economics 24(2), 23-9.

Caggese A. and V. Cunat (2011), “Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate Productivity”, Discussion Paper 685, Financial Markets Group.

Campa, J. M. (2004), “Exchange Rates and Trade: How Important is Hysteresis in Trade?”, European Economic Review 48, 527-48.

Casaburi L., G. A. Minerva and V. Gattai (2007), “Firms’ International Status and Heterogeneity in Performance: Evidence for Italy”, Rivista di Politica Economica, Special Issue May-June, 151-87.

Castellani, D. (2002), “Export Behavior and Productivity Growth: Evidence from Italian Manufacturing Firms,” Review of World Economics 138, 605-28.

Clark, P. B., N. Tamirisa and S.-J. Wei (2004), “A New Look at Exchange Rate Volatility and Trade Flows”, IMF Occasional Paper N. 235.

Clougherty, J.A. and A. Zhang (2008) “Domestic Rivalry and Export Performance: Theory and Evidence from International Airline Markets” , WZB Discussion Paper No. SP II 2008-12.

Das, S., M. J. Roberts and J. Tybout (2007), “Market Entry Costs, Producer Heterogeneity, and Export Dynamics”, Econometrica 75, 837-73.

Davies, R. B. and C. Eckel (2007), “Tax Competition for Heterogeneous Firms with Endogenous The Case of Heterogeneous Fixed Costs”, Institute for International Integration Studies Discussion Paper No. 213.

Davies, R. B. and C. Eckel (2010), “Tax Competition for Heterogeneous Firms with Endogenous Entry”, American Economic Journal: Public Policy 2, 77–102.

Devereux M., Griffith R. (1998), “The Taxation of Discrete Investment Choices”, The Institute for Fiscal Studies, Working Paper series N. W98/16, London.

Eaton, J., S. Kortum and F. Kramarz (2004), "Dissecting Trade: Firms, Industries, and Export Destinations", The American Economic Review: Papers and Proceedings, 94(2), 150-154

Eaton, J., S. Kortum and F. Kramarz (2008), "An Anatomy of International Trade: Evidence from French Firms", NBER Working Paper 14610

Egger P. and Loretz S. (2010), Homogeneous Profit Tax Effects for Heterogeneous Firms?, The World Economy 33(8), 1023-41

Egger P., Loretz S., Pfaffermayr M., Winner H. (2009), “Firm-specific forward-looking effective tax rates”, International tax and Public Finance, 16(6).

Fullerton D. and G. E. Metcalf (2002), “Tax Incidence”, in A. J. Auerbach & M. Feldstein (eds), Handbook of Public Economics, vol. 4 (6), 1787-1872, Elsevier.

Gravelle J., Smetters K. (2006), “Does the Open economy Assumption Really Mean that Labor Bears the Burden of The Corporate Tax?”, Advances in Economic Analysis and Policy 6, 1-42.

Greenaway D. and Kneller R. (2007), Firm Heterogeneity, Exporting and Foreign Direct Investments, The Economic Journal 117, 134-61.

Keen, M., and M. Syed (2006), “Domestic Taxes and International Trade: Some Evidence”, IMF Working Paper, 47.

Harberger A. C. (1962), The Incidence of Corporate Income Tax, Journal of Political Economy 70 (3), 215-40.

Harberger A. C. (2008), “Corporation Tax Incidence: Reflections on What is Known, Unknown and Unknowable”, in Diamond J., Zodrow G. (eds) , Fundamental Tax Reform, The MIT Press.

Helpman, E., M. Melitz and Y. Rubinstein(2008), “Estimating Trade Flows: Trading Partners and Trading Volumes,” Quarterly Journal of Economics 123, 441-487.

Hiep, N. and S. Nishijima (2009), “Export Intensity and Impacts from Firm Characteristics, Domestic Competition and Domestic Constraints in Vietnam: A Micro-data Analysis”, Paper presented at the RIEB Seminar on March 19, 2009.

Lawless M. and K. Whelan (2008), “Where Do Firms Export, How Much, and Why?", Working Papers School of Economics, University College Dublin.

Mayer, T. and G. Ottaviano (2007), "The Happy Few: The Internationalisation of European Firms",Bruegel Blueprint Series.

Melitz, M. J. (2003), "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, 71(6), 1695-1725.

Melitz, M. J. and G. Ottaviano (2008), Market Size, Trade, and Productivity, The Review of Economic Studies, 75(1), 295-316.

Messere K., de Kam F., Heady C. (2003), Tax Policy. Theory and Practice in OECD Countries, Oxford University Press.

Oropallo F., Parisi V. (2007) “Will Italy's Tax Reform Reduce the Corporate Tax Burden? A Micro Simulation Analysis”, Rivista Ufficiale di Statistica 1.

Slemrod, J. (2004), “Are Corporate Tax Rates, or Countries, Converging?” Journal of Public Economics,88.6, 1169-1186.

Vannoni D. and T. Razzolini (2011), “Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets”, The World Economy 34 (6), 984-1013.

Wagner, J. (2007), “Exports and productivity: a survey of the evidence from firm level data”, The World Economy 30, 60–82.

Wooldridge, J. M. (2003), Introductory Econometrics: A Modern Approach, 2nd edition, Mason: South-Western.