Corporate Tax Rates and Economic Growth- A panel study of private investment in the OECD countries

Abstract

Since the 1980s the corporate tax rate of the OECD countries has been on a downward trend, moving from levels of about 44 percentage points on average down to about 25 percentage points in the 2010s. The objective of this thesis is therefore to study the fall of the corporate tax rate and its impact on private investment in the OECD countries in order to evaluate the efficacy of the corporate tax rate as a tool for policymakers. Based on a panel cointegrating relationship between the variables, a panel data approach was implemented to nd that the statutory corporate tax rate has a negative effect on private investment. Moreover, the interpretation of the results implies that the corporate tax rate points towards having a predictive effect rather than a causal effect on private investment. The final section of this paper ends with a discussion of the results in relation to previous research.