Taxes and the global allocation of capital

David Backus, Espen Henriksen, Kjetil Storesletten

Research output: Contribution to journalArticlepeer-review

Abstract

Despite enormous growth in international capital flows, capital-output ratios continue to exhibit substantial heterogeneity across countries. We explore the possibility that taxes, particularly corporate taxes, are a significant source of this heterogeneity. The evidence is mixed. Tax rates computed from tax revenue are inversely correlated with capital-output ratios, as we might expect. However, effective tax rates constructed from official tax rates show little relation to capital-or to revenue-based tax measures. The stark difference between these two tax measures remains an open issue.

Original languageEnglish (US)
Pages (from-to)48-61
Number of pages14
JournalJournal of Monetary Economics
Volume55
Issue number1
DOIs
StatePublished - Jan 2008
Externally publishedYes

Keywords

  • Capital
  • Capital-output ratio
  • International capital flows
  • Taxes

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