Multilateral Corporate Tax Cuts, Agglomeration, and Endogenous Growth

This study examines the impact of multilateral corporate tax cuts on the international location of firms and world growth rate. This research demonstrates that corporate tax cuts result in the relocation of firms from a capital-rich country, which is characterized by agglomeration, to a capital-poor country, which is not characterized by this tendency. In circumstances where the scale of firms leaving an agglomerated country for a non-agglomerated one is low, corpo rate tax cuts result in an increase in world growth rate. Conversely, when such relocation flows of firms are significant, corporate tax cuts lead to a decline in world growth rate.