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Corporate taxation and productivity catch-up: evidence from European firms

Gemmell, Norman; Kneller, Richard; McGowan, Danny; Sanz, Ismael; Sanz-Sanz, Jos� F.

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Norman Gemmell

Danny McGowan

Ismael Sanz

Jos� F. Sanz-Sanz


This paper explores whether higher corporate tax rates reduce the speed with which small firms converge to the productivity frontier by lowering the after-tax returns to productivity-enhancing investments. Using data for 11 European countries we find evidence that their productivity catch-up is slower the higher are statutory corporate tax rates. In contrast, we find large firms are instead affected by effective marginal rates. Using the reduced form model of productivity convergence due to Griffith et al. (2009) our results are robust to a host of robustness checks and a natural experiment that exploits the 2001 German tax reforms.

Journal Article Type Article
Acceptance Date Apr 21, 2016
Online Publication Date Jul 17, 2016
Deposit Date May 21, 2016
Publicly Available Date Jul 17, 2016
Journal Scandinavian Journal of Economics
Print ISSN 0347-0520
Electronic ISSN 1467-9442
Publisher Wiley
Peer Reviewed Peer Reviewed
Keywords Productivity; taxation; convergence
Public URL
Publisher URL
Additional Information This is the peer reviewed version of the following article: Gemmell, N., Kneller, R., McGowan, D., Sanz, I. and Sanz-Sanz, J. F. (2016), Corporate Taxation and Productivity Catch-Up: Evidence from European Firms*. Scandinavian Journal of Economics. doi:10.1111/sjoe.12212, which has been published in final form at: This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.


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