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

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.