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AbstractThe growth impact of tax reforms is probably one of the most controversial issues in economic policy discussions, reflecting deep beliefs in the way economic agents are expected to react to policy changes. The optimal tax theory literature provides a wide array of arguments to identify the mechanisms through which tax reforms might influence growth, depending on the tax category considered and the circumstances under which tax reforms are implemented. The empirical literature has relied on the use of cross-country growth regressions and provided general results leading to normative conclusions on the desirability of specific tax reform options. However, recent research has shown that this approach yields inconclusive results, notably due to identification and endogeneity issues, and the difficulty to account for the true determinants of governments' actions. The dynamic scoring approach combining microsimulation and macro models proves more useful in this respect, especially in order to draw policy recommendations while accounting for the second-round effects of tax reforms. I illustrate these arguments by analysing the growth impact of a hypothetical change from the current flat personal income tax (PIT) rates to progressive taxes in Central and Eastern European (CEE) countries. I find that the estimated impact of such a reform would be rather small but positive when using the dynamic scoring method, while the less-reliable traditional growth regressions would suggest adverse growth effects.

Abstract
Base erosion and profit shifting undermines tax revenues collection and raises public discontent in times when the tax burden has increased significantly for households in most developed economies. In addition, new forms of profit shifting related to intangible investment have emerged rapidly along the traditional use of transfer pricing and debt shifting by multinational companies. In this article, using worldwide company level data for the period 2004–2013, we demonstrate that the sectoral differences in profit shifting are a serious concern from a welfare and policy perspectives. Sectors performing more profit shifting lower their average cost of capital and are thus able to attract more investment to the detriment of sectors less able to dodge taxes. We develop a multilevel model and provide indirect evidence of the welfare costs caused by profit shifting by estimating the cross-sectoral variance of semi-elasticity of declared profit. We also demonstrate that having a larger share of intangible assets is not per se related to more profit shifting and that it may point instead to cross-sectoral differences. Finally, we detect almost no financial shifting and find that the largest part of profit shifting is done by means of transfer pricing.

We study the pattern of geographic concentration of industries in EU countries and regions between 1972 and 1995. We find that changes in concentration levels were mainly due to industry mobility rather than historical accidents and past levels of concentration as often argued by the New Economic Geography literature.

We study the pattern of geographic concentration of industries in EU countries and regions between 1972 and 1995. We find that changes in concentration levels were mainly due to industry mobility rather than historical accidents and past levels of concentration as often argued by the New Economic Geography literature.

The location of ICT producing industries does matter for global competitiveness and long-run growth potential. For instance, the differing contribution of ICT to economic growth between the US and the EU is often mentioned as one of the main cause explaining the diverging growth performance of these two areas since the mid-1990s. In turn, since the mid-1990s, countries with especially dynamic economic growth have tended to be highly specialized in ICT-producing and ICT-using industries, see van Ark and Inkaar (2005). More generally, ICT producing sectors, tend to promote technological change and innovative capability which are seen to be at the core of economic growth and competitiveness. When considering the EU economy, ICT industries appear to be concentrated in a limited number of regions, see Koski et al. (2002) for empirical evidence. A first objective of the present paper is to document the location of ICT producing industries in European regions in order to map existing EU clusters as well as to analyze recent changes in these industries using recent data on employment and firm location, especially in relation to the EU enlargement that has taken place in May 2004. The location of the ICT-producing sectors is not the end of the story however. A crucial aspect concerns the nature of activities that are being undertaken in different regions. Importantly, ICT industries do have different characteristics in terms of human capital, skill requirement, and knowledge content. In particular, because of the positive association between human capital, knowledge and long-run growth, it is important to analyze to what extent EU regional ICT clusters differ in according to these characteristics. The second question addressed in the paper concerns the nature of ICT activities undertaken in EU regions. Finally, the paper provides econometric estimates of the location of firms in ICT industries across EU regions. The paper considers more specifically the case of multinationals' location. Results on the determinants of ...

The reform proposal of the European Commission for a Common Consolidated Corporate Tax Base, the so-called CCCTB, is expected to significantly reduce the cost of doing business by lowering tax compliance costs for cross border operations within the European Union. However, to date the scarcity of comparable estimates on tax compliance costs has limited the assessment of such reduction. We exploit recently released and unique survey data designed to provide comparable information on corporate tax compliance costs in order to assess the impact of the CCCTB, using a general equilibrium modelling approach. Our results suggest that the reduction in tax compliance costs implied by the CCCTB would be associated with greater economic efficiency, including increases in both welfare and GDP. Member States resulting with the lowest compliance costs before the reform and having large inward foreign investment stock would benefit more from the CCCTB. Cross-border business operations would also benefit more from the CCCTB compared to domestic ones. The impact of the CCCTB on non-EU countries such as the US and Japan would be limited.

We investigate the role that climatic change has played in the pattern of urbanization in sub-Saharan African countries compared to the rest of the developing world. To this end we assemble a cross-country panel data set that allows us to estimate the determinants of urbanization. The results of our econometric analysis suggest that climatic change, as proxied by rainfall, has acted to change urbanization in sub-Saharan Africa but not elsewhere in the developing world. Moreover, this link has become stronger since decolonization, which is likely due to the often simultaneous lifting of legislation prohibiting the free internal movement of native Africans.