Taxes and the Global Allocation of Capital

31 Pages Posted: 29 Nov 2007

See all articles by David K. Backus

David K. Backus

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Espen Henriksen

Department of Financial Economics, BI Norwegian Business School

Kjetil Storesletten

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007

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.

Suggested Citation

Backus, David K. and Henriksen, Espen and Storesletten, Kjetil, Taxes and the Global Allocation of Capital (November 2007). NBER Working Paper No. w13624. Available at SSRN: https://ssrn.com/abstract=1033750

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Espen Henriksen

Department of Financial Economics, BI Norwegian Business School ( email )

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Norway

Kjetil Storesletten

University of Oslo - Department of Economics ( email )

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Norway
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+47 2285 5035 (Fax)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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