Do Wages Rise When Corporate Taxes Fall?

Moore, Nils aus dem; Kasten, Tanja; Schmidt, Christoph Μ.

doi:10.2139/ssrn.2579680

SSRN Journal

2014

DOI: 10.2139/ssrn.2579680

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Do Wages Rise When Corporate Taxes Fall?

Nils aus dem Moore

Tanja Kasten

Christoph Μ. Schmidt

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Cited by 2 publications

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“…1212The study of aus dem Moore et al. (2014) focuses on the 2000 German Business Tax Reform that reduced the top statutory CIT rate by about 26% while this tax rate reduction was accompanied by a broadening of the tax base. We, therefore, group their estimates under the variable Tax base .…”

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Wage response to corporate income taxes: A meta‐regression analysis

Knaisch

Pöschel

2023

Journal of Economic Surveys

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The wage elasticity to corporate income tax (CIT) is an essential parameter for assessing tax policy reforms. This paper applies meta‐regression analysis to quantitatively review the growing empirical tax incidence literature that indicates a substantial shift of the tax burden onto employees. While most studies report a large wage‐reducing effect of the CIT, our findings suggest that estimates with positive values are published less often than they should. After accounting for the bias, we find no significant average association between wage rates and corporate taxation. We document that the tax variable, econometric method, type of tax variation, and underlying time and country coverage of studies drive the heterogeneity among reported effects. The implied best‐practice estimates suggest that the tax elasticity of wages is systematically larger for emerging countries and smaller when tax changes at the subnational level are exploited.

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confidence: 99%

Wage response to corporate income taxes: A meta‐regression analysis

Knaisch

Pöschel

2023

Journal of Economic Surveys

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Sharing the Burden? Empirical Evidence on Corporate Tax Incidence

Dwenger

Rattenhuber

Steiner

2019

German Economic Review

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract:This study assesses the burden of capital income tax passed onto labor through wage bargaining over economic rents, using estimations based on a unique pseudo-panel data set from Germany for the period 1998 to 2006. Tax return data cover the universe of corporations subject to corporate income tax, and labor market variables reflect the full record of employees covered by Social Security. We find that wage bargaining after a reduction in tax rates does not increase the wage bill if employment effects neglected by previous empirical studies are taken into account. Any increase in the total wage bill by higher wage rates set is equally compensated for by lower levels of employment. If adjustments in employment due to the increased user cost of capital are taken into account, a cut in corporate income taxes by 1 euro increases the wage bill by 0.47 euro. The identification of these effects comes from variation in the firm-specific average corporate tax rate across firms and over time resulting from two substantial tax reforms. The endogeneity of the firmspecific tax rate is controlled for by an instrumental variable approach. The instrument for the observed average tax rate is the counterfactual tax rate that a corporation would have faced in a particular period, had there been no endogenous change of its tax base, constructed using a detailed microsimulation model. JEL Classification: H22, H25, J21, J31, H32

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Do Wages Rise When Corporate Taxes Fall?

Cited by 2 publications

References 24 publications

Wage response to corporate income taxes: A meta‐regression analysis

Wage response to corporate income taxes: A meta‐regression analysis

Sharing the Burden? Empirical Evidence on Corporate Tax Incidence

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