Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198958 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7598
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We construct a theoretical model to capture the compensation and efficiency effects of globalization in a set up where the redistributive tax rate is chosen by the median voter. The model predicts that the two alternative modes of globalization- trade liberalization and financial openness- could potentially have different effects on taxation. We then provide some empirical evidence on the relationship between taxation and the alternative modes of globalization using a large cross-country panel data set. On average, globalization is associated with lower taxation but there is some evidence that in countries with high capital-labor ratio, globalization is associated with increased taxation. We make a distinction between de jure and de facto measures of globalization and find a strong negative relationship between taxation and de jure measures of globalization. The results for de facto measures of globalization are mixed.
Subjects: 
trade liberalization
capital market openness
redistributive taxation
median voter
JEL: 
F11
F21
F68
H11
Document Type: 
Working Paper
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