Taxes and the Global Allocation of Capital

29 Pages Posted: 13 Oct 2008

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 Storeletten

affiliation not provided to SSRN

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.

Keywords: capital, taxes, capital-output ratio, international capital flows

Suggested Citation

Backus, David K. and Henriksen, Espen and Storeletten, Kjetil, Taxes and the Global Allocation of Capital (November 2007). NYU Working Paper No. 2451/26061, Available at SSRN: https://ssrn.com/abstract=1281943

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Espen Henriksen

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

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Oslo, 0442
Norway

Kjetil Storeletten

affiliation not provided to SSRN

No Address Available

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