Leaning Right and Learning from the Left: Diffusion of Corporate Tax Policy in the OECD

50 Pages Posted: 29 Oct 2008 Last revised: 27 May 2009

See all articles by Nathan M. Jensen

Nathan M. Jensen

Washington University in St. Louis - Department of Political Science

René Lindstädt

University of Birmingham

Date Written: May 26, 2009

Abstract

There is an increased focus in comparative politics and international relations on how choices of national governments are dependent on choices made by governments in other countries. We argue that while the relationship between policy choices across countries is often labeled as either diffusion or competition, in many cases the theoretical mechanisms underpinning these labels are unclear. In this paper we build a model of social learning with a specific application to the diffusion of corporate tax reductions. This model yields predictions that are differentiable from existing models of tax competition. Specifically, we argue that social learning is most likely to take place in the wake of tax policy cuts by left governments. We test this model using an existing data set of corporate tax rate changes and an author-created data set of changes in tax legislation, covering twenty OECD countries from 1980-1998.

Keywords: Tax Policy, Corporate Taxation, Tax Competition, Social Learning, Diffusion

JEL Classification: D8, D84, F42, H2

Suggested Citation

Jensen, Nathan M. and Lindstaedt, Rene, Leaning Right and Learning from the Left: Diffusion of Corporate Tax Policy in the OECD (May 26, 2009). Available at SSRN: https://ssrn.com/abstract=1291285 or http://dx.doi.org/10.2139/ssrn.1291285

Nathan M. Jensen

Washington University in St. Louis - Department of Political Science ( email )

219 Eliot Hall
St. Louis, MO 63130
United States

Rene Lindstaedt (Contact Author)

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

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