Date of Award

5-2013

Document Type

Thesis

Degree Name

Master of Arts (MA)

Legacy Department

Economics

Advisor

DOUGAN, WILLIAM R

Committee Member

FLECK , ROBERT K

Committee Member

TSUI , KEVIN K

Abstract

Using panel data for 22 OECD countries during 1985-2010 and 1970-2010, the author re-evaluates the existing evidence on the effects of corporate income taxes on four kinds of investments: foreign direct investment inflows, net domestic investment, total investment, and foreign direct investment outflows. The corporate income tax rate with a one-year lag has a statistically significant and negative effect on foreign direct investment inflows, but it has no clear relationship with the other three types of investments. This finding suggests that investment from the corporate sector will go to the domestic non-corporate sector in order to equalize the actual rate of return across the corporate and non-corporate sectors because (1) residential investment by households is not affected by the corporate income tax, and the housing market may be booming in the same period, and (2) foreign direct investment is mostly corporate investment, while domestic investment is more evenly split between the corporate and non-corporate sectors. This suggestion is consistent with economic theory, notably Harberger (1962).

Included in

Economics Commons

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