Taxes and the Global Allocation of Capital

Publisert i

Journal of Monetary Economics 55 (1), 2008, pages 48-61


Despite enormous growth in international capital flows, capital-output ratios continue to exhibit substantial heterogeneity across countries. We explore the possibility that taxes, particularly corporate taxes, are a significant source of this heterogeneity. The evidence is mixed. Tax rates computed from tax revenue are inversely correlated with capital-output ratios, as we might expect. However, effective tax rates constructed from official tax rates show little relation to capital—or to revenue-based tax measures. The stark difference between these two tax measures remains an open issue.


By David Backus, Espen Henriksen and Kjetil Storesletten
Published June 29, 2011 1:09 PM - Last modified Mar. 9, 2018 1:48 PM