Repeated attempts at uncovering the impact of country size on various socio-economic factors have shown that country size doesn’t matter except for trade openness. The present paper takes another look at the relevance of country size. Using newly available macro as well as firm-level micro data on tax rates, the paper finds tax rates are more burdensome in the relatively larger countries. The finding is robust to a large number of controls, alternative specifications and estimation methods including the instrumental variables regression method. Further, we find some evidence suggesting that the strength of the relationship between tax rates and country size varies with the level of income of the country. It is possible that the failure to account for such non-linearity could be one reason why previous studies have failed to find any robust impact of country size on various socio-economic variables.
- Country size,
- Tax rates,
- Business climate
Available at: http://works.bepress.com/mohammad_amin/38/