Capital Taxation, Development, and Globalization: Evidence from a Macro-Historical Database∗ Pierre Bachas†, Matthew Fisher-Post‡, Anders Jensen§, Gabriel Zucman¶ May 2024
Abstract
This paper builds and analyzes a new global macro-historical database of effective tax rates on capital and labor in 154 countries. We establish a new stylized fact: while effective capital tax rates fell in developed countries between 1965 and 2018, they rose in developing countries since 1990. Multiple research designs at the country, sector and firm-level suggest that trade openness contributed to this rise, by increasing the share of output produced in corporations and larger firms, where effective capital taxation is higher. In contrast to a common view, globalization appears in many countries to have supported governments’ ability to tax capital.
∗
This paper was previously circulated under the title "Globalization and Factor Income Taxation." The database built in this paper is available online at http://globaltaxation.world. Additional material is available in the online supplementary appendix: link here. We acknowledge financial support from the Weatherhead Center for International Affairs at Harvard University and the World Bank Development Economics’ Research Support Budget. Zucman acknowledges support from the Stone Foundation. We are indebted to Elie Gerschel, Xabier Moriana, Rafael Proença, Roxanne Rahnama and Anton Reinicke for excellent research assistance. We thank numerous seminar participants and in particular Pierre Boyer, Damien Capelle, Denis Cogneau, Martin Fiszbein, Jason Furman, Simon Galle, Pinelopi Goldberg, Gordon Hanson, Amit Khandelwal, David Lagakos, Etienne Lehmann, Juliana Londoño-Vélez, Benjamin Marx, Sergey Nigai, Mathieu Parenti, Steven Pennings, Nam Pham, Thomas Piketty, Tristan Reed, Ariell Reshef, Bob Rijkers, Dani Rodrik, Nicholas Ryan, Emmanuel Saez, Nora Strecker, Romain Wacziarg, Daniel Yi Xu and Roman Zarate for insightful comments and discussions. The findings, interpretations, and conclusions expressed in this paper are those of the authors and do not represent the views of the World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. † ESSEC-Business School and World Bank Research, pbachas@worldbank.org ‡ Paris School of Economics, mfp@psemail.eu § Harvard Kennedy School and NBER, anders_jensen@hks.harvard.edu ¶ Paris School of Economics, UC Berkeley and NBER, zucman@berkeley.edu