Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany†

Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany† AbstractThis paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identification. Using event study designs and difference-in-differences models, we find that workers bear about one-half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importance of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young, and female employees bear a larger share of the tax burden. This has important distributive implications. (JEL H25, H31, H71, J16, J24, J31) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany†

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Publisher
American Economic Association
Copyright
Copyright © 2018 © American Economic Association
ISSN
0002-8282
D.O.I.
10.1257/aer.20130570
Publisher site
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Abstract

AbstractThis paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identification. Using event study designs and difference-in-differences models, we find that workers bear about one-half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importance of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young, and female employees bear a larger share of the tax burden. This has important distributive implications. (JEL H25, H31, H71, J16, J24, J31)

Journal

American Economic ReviewAmerican Economic Association

Published: Feb 1, 2018

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