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Global corporate income tax competition, knowledge spillover, and growth

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  • Maebayashi, Noritaka
  • Morimoto, Keiichi

Abstract

Using a two-country model of endogenous growth with international knowledge spillovers, this study analyzes the welfare consequences of global corporate income tax competition. Although the Nash equilibrium tax rate can be excessively high or low according to the degree of spillover, this does not lead to significant welfare losses. The key to this outcome is that corporate income tax competition for growth maximization, which we consider hypothetically, attains the maximum growth rate despite complex externalities and strategic interactions.

Suggested Citation

  • Maebayashi, Noritaka & Morimoto, Keiichi, 2024. "Global corporate income tax competition, knowledge spillover, and growth," European Economic Review, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:eecrev:v:164:y:2024:i:c:s0014292124000527
    DOI: 10.1016/j.euroecorev.2024.104723
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    More about this item

    Keywords

    Corporate income tax; Tax competition; Spillover; Economic growth; Welfare;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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