DP11259 The Taxing Deed of Globalization

Author(s): Peter Egger, Sergey Nigai, Nora Strecker
Publication Date: May 2016
Keyword(s): Globalization, Income taxes, International Trade, migration, Tax progressivity
JEL(s): F1, F6, H2, H3
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11259

We examine the effects of globalization on the size and composition of tax revenues, worker-specific tax burdens, and effective average labor income tax rates using a unique international database on income tax calculators. We find that due to increasing mobility of firms and high-income workers, globalization led governments in OECD countries to seek tax revenues from alternative sources, specifically from employee-borne taxes paid by relatively less mobile middle-income workers. In 1994-2007, they experienced a globalization-induced rise in their personal income tax rate of around 1.5, whereas the top 1% of workers faced a reduction of approximately 1.5 percentage points.