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The Role of Corporate Taxation in a Large Welfare State

abstract In comparing the impact of corporate taxation and social insurance on foreign direct investment (FDI) and unemployment, the paper derives four main results: (i) the optimal size of the welfare state depends on the degree of risk-aversion, the unemployment rate and the excess burden of labor taxes. Unemployment partly reflects the country's exposure to globalization; (ii) corporate taxation and social insurance can have equivalent effects on unemployment and outbound FDI; (iii) while an increase in the corporate tax raises corporate tax revenue, it is likely to worsen total fiscal stance; (iv) a corporate tax should be used to contribute to welfare state financing only in exceptional cases.
   
type journal paper
   
keywords Corporate tax, foreign direct investment, unemployment, welfare state.
   
language English
kind of paper journal article
date of appearance 19-8-2009
journal Swiss Journal of Economics and Statistics
publisher Peter Lang
ISSN 0303-9692
number of issue 145
page(s) 441-450
review not reviewed
   
citation Keuschnigg, C. (2009). The Role of Corporate Taxation in a Large Welfare State. Swiss Journal of Economics and Statistics(145), 441-450.