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Leaning Right and Learning from the Left: Diffusion of
Corporate Tax Policy in the OECD

Nathan M. Jensen, Washington University, St Louis, Department of Political Science
Rene Lindstadt, Trinity College Dublin

Abstract

There is an increased focus in comparative politics and international relations on how choices of
national governments are dependent on choices made by governments in other countries. We argue
that while the relationship between policy choices across countries is often labeled as either diffusion
or competition, in many cases the theoretical mechanisms underpinning these labels are unclear. In
this paper we build a model of social learning with a specific application to the diffusion of corporate
tax reductions. This model yields predictions that are differentiable from existing models of tax
competition. Specifically, we argue that social learning is most likely to take place in the wake of
tax policy cuts by left governments. We test this model using an existing data set of corporate tax
rate changes and an author-created data set of changes in tax legislation, covering twenty OECD
countries from 1980-1998.


Last updated 28 August 2014 by IIIS (Email).