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Volume 6, No. 1,
April 2007
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The Impact of Trade and Factor Flows on
Domestic Taxation
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Ryo Takashima*
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Department of Economics, Washington &
Jefferson College, U.S.A.
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Abstract
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Previous empirical literature has looked at the effect of
trade on capital and labor tax rates or the effect of
labor flow on the labor tax rate. However, the theoretical
literature suggests that both trade and factor flows can
affect capital and labor tax rates simultaneously. This
paper presents an empirical analysis of how domestic
taxation is affected by economic integration. We find no
evidence that trade and capital flows alter capital and
labor tax rates. Rather, we find that increasing economic
integration leads to a lower consumption tax.
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Key words
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economic
integration; effective average tax rate; migration;
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capital flow
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JEL classification
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H2; F15; F2
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