This paper analyzes the extent to which the degree of international economic integration, both financial and trade, affects corporate tax rates. It explores this issue in the context of strategic behavior by countries, taking into account other global and domestic political economy factors. Tax rates are analyzed using a unique tax dataset for advanced and developing economies extending over five decades. We report a number of novel results: there is no general negative relationship between financial globalization and corporate tax rates and revenues—results vary according to country grouping with OECD countries showing a positive relationship; the United States exhibits a “Stackelberg” type of leadership on other countries; trade integration is inversely correlated with tax rates; and public sentiment and ideology affect tax rates. The policy implications of these findings, particularly given budgetary pressures in the aftermath of the global crisis, are noted.
In the 1990s, widespread investment in information technology (IT) boosted U.S. labor productivity growth and contributed to the country’s economic dynamism. At a March 11 discussion,”White-Collar Outsourcing,” hosted by the Institute for International Economics (IIE), Catherine Mann (Senior Fellow, IIE) argued that an even wider diffusion of IT throughout the U.S. economy, coupled with an upgrade of domestic IT skills, will spur a second wave of productivity growth. This, she said, can be achieved through a combination of the globalization of software and IT services, which will make the overall IT package affordable for more businesses, and domestic adjustment policies aimed at helping U.S. workers climb up the IT skills ladder, “as rungs on the bottom are moved elsewhere or eliminated entirely.”