Do higher corporate taxes reduce wages? : Micro evidence from Germany


Fuest, Clemens ; Peichl, Andreas ; Siegloch, Sebastian

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URL: https://ub-madoc.bib.uni-mannheim.de/40632
URN: urn:nbn:de:bsz:180-madoc-406328
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-003
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > Zentrum für Europ. Wirtschaftsforschung (ZEW)
MADOC publication series: Veröffentlichungen des ZEW (Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 380 Commerce, communications, transportation
Classification: JEL: H2 , H7 , J3,
Keywords (English): Business tax , wage incidence , administrative data , local taxation
Abstract: This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities. Administrative linked employer-employee data allows estimating heterogeneous worker and firm effects. We set up a general theoretical framework showing that corporate taxes can have a negative effect on wages in various labor market models. Using an event study design, we test the predictions of the theory. Our results indicate that workers bear about 40% of the total tax burden. Empirically, we confirm the importance of both labor market institutions and profit shifting possibilities for the incidence of corporate taxes on wages.

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