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dc.contributor.authorMittermaier, Ferdinanden_US
dc.contributor.authorRincke, Johannesen_US
dc.date.accessioned2010-11-12en_US
dc.date.accessioned2011-06-29T11:21:20Z-
dc.date.available2011-06-29T11:21:20Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/46560-
dc.description.abstractWe address the role of labor cost differentials for national tax policies. Using a simple theoretical framework with two countries competing for a mobile firm, we show that in a bidding race for FDI, it is optimal for governments to compensate firms for international labor cost differentials. Using panel data for western Europe, we then put the model prediction to an empirical test. Exploiting exogenous variation in labor cost differentials induced by the breakdown of communism in eastern Europe, we find strong support for the model prediction that countries with relatively high labor costs tend to set lower tax rates in order to attract mobile capital. Our key result is that an increase in the unit labor cost differential by one standard deviation decreases the statutory tax rate by 7.3 to 7.5 percentage points.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper: Public Finance 3197en_US
dc.subject.jelH25en_US
dc.subject.jelH73en_US
dc.subject.jelF23en_US
dc.subject.ddc330en_US
dc.subject.keywordforeign direct investmenten_US
dc.subject.keywordcorporate taxationen_US
dc.subject.keywordlabor costsen_US
dc.subject.stwArbeitskostenen_US
dc.subject.stwLohnstrukturen_US
dc.subject.stwDirektinvestitionen_US
dc.subject.stwUnternehmensbesteuerungen_US
dc.subject.stwSteuerpolitiken_US
dc.subject.stwEuropaen_US
dc.titleDo Countries Compensate Firms for International Wage Differentials?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn639445896en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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