Tax Competition and Employment

58 Pages Posted: 23 Nov 2019 Last revised: 14 Jun 2021

See all articles by Stephen Glaeser

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Marcel Olbert

London Business School - Department of Accounting; ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research

Ann-Catherin Werner

University of Mannheim Business School

Date Written: December 12, 2019

Abstract

We find a negative relation between corporate tax rates and export levels, and between corporate tax rates and investment by multinational firms’ foreign subsidiaries. These results suggest that changes in foreign tax rates can affect product market competition in a domestic country by changing the nature of import competition and competition from foreign-owned peer firms. Using cross-border trade statistics and multinational firm ownership data, we find that decreases in foreign tax rates relative to the domestic tax rate negatively affect employment at domestic firms ex ante exposed to import competition and competition from foreign-owned peers. The effect is greater for domestic firms with no foreign operations, given their lack of international tax planning and diversification opportunities, and for domestic firms that are more sensitive to product market competition.

Keywords: Tax competition, Competition, Employment, Real effects, Trade

JEL Classification: E24, F14, F16, H23, H35

Suggested Citation

Glaeser, Stephen and Olbert, Marcel and Werner, Ann-Catherin, Tax Competition and Employment (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=3485551 or http://dx.doi.org/10.2139/ssrn.3485551

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599
United States

Marcel Olbert (Contact Author)

London Business School - Department of Accounting ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

ZEW – Leibniz Centre for European Economic Research - Corporate Taxation and Public Finance Research ( email )

United States

Ann-Catherin Werner

University of Mannheim Business School ( email )

Chair of International Taxation
Schloss
Mannheim, 68131
Germany

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