Our IO approach links optimal effective corporation tax rates to the nature of sunk costs within industries. Theory predicts that optimal effective corporation tax rates will be negatively related to industry specific sunk cost, and hence
industry concentration. Governments should tax industries with monopolistic power softly. Evidence suggests that this Schumpeterian (1942) principle of corporate taxation was used widely across industries in France, Italy and the UK in the 1990s.
Type of Material
Working Paper
Publisher
Trinity College Dublin. Institute for International Integration Studies (IIIS)
Series
IIIS Discussion Papers
No. 97
Copyright (Published Version)
Institute for International Integration Studies, 2005
