Globalization and Factor Income Taxation

89 Pages Posted: 29 Aug 2023

See all articles by Pierre Jean Bachas

Pierre Jean Bachas

World Bank

Matthew Fisher-Post

Paris School of Economics (PSE)

Anders Jensen

Harvard University - Harvard Kennedy School (HKS)

Gabriel Zucman

University of California, Berkeley - Department of Economics

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Date Written: August 2023

Abstract

Exploiting a new global macro-historical database of effective tax rates, we uncover an intriguing pro-tax-capacity effect of international trade. While effective capital tax rates have fallen in developed countries, they have risen in developing countries since the mid-1990s. Event studies of trade liberalization shocks and instrumental variable regressions show that a significant share of this rise can be explained by trade integration, which increases the share of output produced in large corporations, where effective taxation of capital is higher. In contrast to a widely held view, globalization appears in many countries to have supported the ability of government to tax capital.

Suggested Citation

Bachas, Pierre Jean and Fisher-Post, Matthew and Jensen, Anders and Zucman, Gabriel, Globalization and Factor Income Taxation (August 2023). HKS Working Paper No. RWP23-027, Available at SSRN: https://ssrn.com/abstract=4555395 or http://dx.doi.org/10.2139/ssrn.4555395

Pierre Jean Bachas

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Matthew Fisher-Post

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Anders Jensen (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Gabriel Zucman

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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