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The Role of Corporate Taxation in a Large Welfare State

Swiss Journal of Economics and Statistics volume 145, pages 443–452 (2009)Cite this article

Summary

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.

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Authors and Affiliations

  1. University of St. Gallen (IFF-HSG), CEPR and CESifo, Varnbuelstrasse 19, CH-9000, St. Gallen, Switzerland

    Christian Keuschnigg

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  1. Christian Keuschnigg
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Correspondence to Christian Keuschnigg.

Additional information

I am grateful to seminar participants at the annual meeting of the Swiss Economic Association 2009 for helpful comments.

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Open Access This article is distributed under the terms of the Creative Commons Attribution 2.0 International License ( https://creativecommons.org/licenses/by/2.0 ), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Keuschnigg, C. The Role of Corporate Taxation in a Large Welfare State. Swiss J Economics Statistics 145, 443–452 (2009). https://doi.org/10.1007/BF03399290

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  • DOI: https://doi.org/10.1007/BF03399290

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