Killing a second bird with one stone? Promoting firm capital growth and exports through tax policy

Michele Bernini, Tania Treibich*

*Corresponding author for this work

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Does a lower tax rate on profits promote the international activity of small and medium enterprises? This article addresses this question by exploiting a policy experiment in France. A reduction in corporate taxation is found to boost small and medium enterprises' capital growth and export participation, but to reduce employment growth. We estimate that a 50% reduction in the statutory tax rate induces, on average, a 29% increase in capital and a 6% increase in individual firms' probability of exporting. However, the estimated average treatment effect on the treated conceals substantial heterogeneity across firms with different initial productivity and size.
Original languageEnglish
Pages (from-to)829-845
Number of pages17
JournalIndustrial and Corporate Change
Issue number5
Publication statusPublished - Oct 2016

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