Presentation on the regional effects of corporate taxes by Dr. Oliver Krebs

The introduction of a global minimum corporate tax rate has long been discussed by academia and policy makers, with the objective of reducing competitive distortions between countries due to divergent tax rates. Yet, the question arises: What consequences would a harmonization of national corporate tax rates entail at the regional level? In his current project “Regional Implications of National Tax Policies”, Dr. Oliver Krebs investigates this issue in collaboration with Peter Egger (ETH Zurich), Valeria Merlo, and Georg Wamser (both University of Tübingen).

Drawing on data from 1,306 European NUTS-3 regions and 13 sectors, the authors examine the regional and sector-specific effects of an EU-wide harmonization of corporate taxation. To this end, they develop and calibrate a general equilibrium, spatial quantitative model which, for the first time, integrates both spatial and sectoral adjustment mechanisms by accounting for region- and sector-specific production structures, trade linkages, and commuting flows.

Preliminary findings of the analysis suggest that a uniform corporate tax rate induces heterogeneous responses in real consumption and overall economic welfare at the regional level. This heterogeneity emerges both across countries and within the regions of individual countries. In Germany, for instance, a reduction of the corporate tax rate to the EU-wide median would lead in some regions to growth in consumption and wages—driven by increased competitiveness of local production—while other regions would experience declines in real consumption and wages due to rising costs of intermediate input factors.

On September 17, 2025, Dr. Oliver Krebs presented the results of his project in the seminar series at the Thünen Institute of Rural Economics.

Contact: Dr. Lena Gerling