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US corporate tax rate cuts: Spillovers to the Irish economy


Working papers


US corporate tax rate cuts: Spillovers to the Irish economy

Download PDF: Working Paper 38

This paper shows that past US corporate income tax rate cuts created small but persistent positive spillovers to the Irish economy.

Author: Daragh Clancy (ESM)



We examine spillovers to the Irish economy from US corporate income tax rate cuts and find they lead to a small but persistent increase in Irish economic output. Our analysis of the transmission channels shows that an increase in investment, employment and exports in the externally-financed industrial sector largely drives this expansion. We also find that output spillovers from US corporate income tax cuts are larger when there is slack in the Irish labour market. Our findings suggest that the changing structure of the Irish economy means any spillovers to real economic activity from the recent US corporate tax cuts could be relatively minor. However, the larger presence and shifting focus of foreign multinational corporations’ operations in Ireland means lessons from past US corporate tax cuts may be of limited value in predicting the effects of the recent US tax system reform.

Disclaimer: This Working Paper should not be reported as representing the views of the ESM. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the ESM or ESM policy. No responsibility or liability is accepted by the ESM in relation to the accuracy or completeness of the information, including any data sets, presented in this Working Paper.

Keywords: Corporate tax shocks, cross-border spillovers, Irish economy

JEL codes: E62, F23, F44

Source: European Stability Mechanism | Working Paper Series | Volume 2019 | No 38 | July 2019 | 51 Pages

Copyright © European Stability Mechanism, 2019 | All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the European Stability Mechanism.

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