Choosing a Lesser Evil: Partisanship, Labor, and Corporate Taxation under Globalization

Abstract

Leftist governments tend to tax corporations heavily. However, they are unable to do so all the time. In this study, I posit that whether leftist governments can enact this preferred tax policy is conditional on the policy environment. When leftist governments are pressured by their economic competitors to reduce labor rights protection, instead of giving in, they choose to cut corporate tax rates, because the former is more politically harmful than the latter, and the latter is equally effective in achieving the policy goal the former is intended to accomplish. Using novel global data on labor rights from 1994 to 2012 and the structural equivalence technique to capture the policy pressure to restrict labor rights, I find robust evidence for the argument. This finding suggests that facing globalized economic competition, leftist governments make strategic compromise by adopting market-oriented policies in issue areas that deviate from their desirable ideological positions but are less costly than simply yielding to the pressure to alter policies in those issue areas that directly hurt their core constituencies.

A Network Analysis of Judicial Cross-Citations in Europe

“…For instance, a number of studies show how measurements of national culture can be related to differences in rule-of-law indicators (Licht, Goldschmidt, and Schwartz 2007; Davis and Abdurazokzoda 2016) as well as specific legal rules (Licht, Goldschmidt, and Schwartz 2005; Davis and Williamson 2016). Other studies find, for example, that the colonial background of countries and a common language may play a role in the similarities in company law (and possibly also constitutional law) (Siems 2007; Goderis and Versteeg 2014), that differences in the use of the death penalty reflect political and religious differences (Greenberg and West 2008), and that variations of corporate tax rates and labor law rules are a reflection of economic competition and international pressure (Janz and Messerschmidt 2020; Wang 2021).…”

Mapping a causal scheme of indicators in the COVID-19 crisis

“…For instance, this approach has been used for studies dealing with the determinants of corporate-tax rates, investors and employment protection across countries (e.g. Wang, 2021;Pagano and Volpin, 2005). In the present case, it may be feasible to conduct such a panel analysis, as data on both COVID policies and COVID infections/deaths are available across time.…”