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The effect of corporate taxes on firm productivity in Korea

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  • The effect of corporate taxes on firm productivity in Korea
  • Kim, Jiyoung
  • The Association of Korean Economic Studies


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Title The effect of corporate taxes on firm productivity in Korea
Similar Titles
Material Type Articles
Author(English)

Kim, Jiyoung

Publisher

[Seoul]:The Association of Korean Economic Studies

Date 2013-04
Journal Title; Vol./Issue Korea and the World Economy:vol. 14(no. 1)
Pages 26
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Industry and Technology < Entrepreneurship
Holding AKES

Abstract

This paper explains how marginal corporate tax rate at the industry level affects individual firm productivity. I constructed the individual firm level data of over 1,000 firms in Korea from 1980 to 2010, and estimated an error correction model. Firm productivity was measured as total factor productivity, which denotes the residual of the estimated Cobb-Douglas production function. The results show that corporate taxes have a negative effect on firm productivity, and that the magnitude of productivity reduction from corporate taxes increases as the firm generates higher profitability. I also found that the total factor productivity of an individual firm increases faster in the sector which reveals faster growing productivity.