Firm mobility and jurisdictions’ tax rate choices: Evidence from immobile firm entry

Dominika Langenmayr*, Martin Simmler

*Korrespondierende*r Autor*in für diese Arbeit

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung

Abstract

Capital mobility is one of the key determinants of corporate tax rates. We first show theoretically that governments will set higher tax rates on firm profits after an immobile firm has entered. We then test this prediction in a well-identified setting, using the rapid growth of wind power plants (a very immobile industry) and the large variation in local business taxes across Germany for identification. We confirm that municipalities increase corporate tax rates by up to 24% after immobile firm entry. The effect is stronger when immobile firms make up a larger share of the overall tax base.

OriginalspracheEnglisch
Aufsatznummer104530
FachzeitschriftJournal of Public Economics
Jahrgang204
DOIs
PublikationsstatusVeröffentlicht - Dez. 2021

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Publisher Copyright:
© 2021 Elsevier B.V.

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