Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

By Clemens Fuest, Andreas Peichl, Sebastian Siegloch. Social Science Research Network, 2018

445 citations recorded by the source corpus.

This 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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/7a474e81db5b65b2c514ba9d641f20fa672f68f1

Citations in the corpus

• Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms (2016, unknown): “Fuest et al. (2013) use employer-firm linked data to assess the effects of corporate taxes on wages in Germany and Desai et al. (2007) analyze international variation in corporate tax rates using data from American multinationals.”
• Tax Policy and Local Labor Market Behavior (2019, unknown): “Second, our findings improve our understanding of the effects of corporate taxation on economic behavior, labor markets, and inequality (Kovak et al., 2017; Arulampalam et al., 2012; Fuest et al., 2018; Suárez Serrato and Zidar, 2016; Nallareddy et al., 2018; Yagan, 2015).”
• Difference-in-Differences Estimators of Intertemporal Treatment Effects (2020, unknown): “For instance, the design of Fuest et al. (2018) corresponds to Design 4.”