Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265977 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9942
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper analyzes the macroeconomic impact of corporate taxation. The analysis is conducted in a quantitative two-country model. In the first step, the paper describes the long-run effects of corporate taxation. A reduction in the corporate-income tax rate increases GDP, wages, consumption, investment, and business density. The trade balance is at the same time negatively affected. Firms headquartered in a country which lowers its corporate tax become internationally less active and instead focus more on their domestic market. In the second step, the paper presents adjustment dynamics that are induced by a corporate-tax reform. The dynamic response of the economy can substantially differ when comparing shorter and longer time horizons.
Subjects: 
corporate taxation
macroeconomy
heterogeneous firms
multinationals
international spillovers
JEL: 
E62
F42
H25
Document Type: 
Working Paper
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