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Jürges, Hendrik

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

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Volume 6, Issue 1


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Does the Open Economy Assumption Really Mean That Labor Bears the Burden of a Capital Income Tax?

Jane G Gravelle / Kent A. Smetters
Published Online: 2006-08-01 | DOI: https://doi.org/10.2202/1538-0637.1548


The conventional view holds that domestic labor, not domestic capital, bears most of the long-run burden of a corporate income tax in an open economy due to the ability of capital to move across borders. This result assumes that domestic and foreign products (as well as investments) are perfect substitutes. This paper includes imperfect product substitution within a multi-sector open-economy model, and shows that much of the burden may fall on capital. To be sure, if savings falls sufficiently, much of the burden shifts to labor, but this fact also holds in a closed economy. Hence, the debate about tax incidence must focus more on the savings response and less on whether an economy is open or closed.

Keywords: corporate income tax; incidence

About the article

Published Online: 2006-08-01

Citation Information: Advances in Economic Analysis & Policy, Volume 6, Issue 1, ISSN (Online) 1538-0637, DOI: https://doi.org/10.2202/1538-0637.1548.

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