Sharing the Burden: Empirical Evidence on Corporate Tax Incidence

40 Pages Posted: 4 Oct 2011 Last revised: 20 Sep 2013

See all articles by Nadja Dwenger

Nadja Dwenger

Max Planck Institute for Tax Law and Public Finance

Pia Rattenhuber

Independent

Viktor Steiner

Free University of Berlin (FUB)

Date Written: October 1, 2011

Abstract

This study investigates the direct incidence of the corporate income tax (CIT) through wage bargaining, using an industry-region level panel data set on all corporations in Germany over the period 1998–2006. For the first time we account for employment effects which result from taxinduced wage changes. Workers share in reductions of the CIT burden; yet, the net effect of wage bargaining on the corporate wage bill, after an exogenous € 1 decrease in the CIT burden, is as little as 19 to 29 cents. This is about half of the effect obtained in prior literature focusing on wages alone.

Keywords: tax incidence, wage determination, corporate income taxation, corporate tax return data

JEL Classification: H22, H25, J21, J31, H32

Suggested Citation

Dwenger, Nadja and Rattenhuber, Pia and Steiner, Viktor, Sharing the Burden: Empirical Evidence on Corporate Tax Incidence (October 1, 2011). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2011-14, Available at SSRN: https://ssrn.com/abstract=1938156 or http://dx.doi.org/10.2139/ssrn.1938156

Nadja Dwenger (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

10117
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/public_economics/public_economics_people/dwenger_nadja.cfm

Pia Rattenhuber

Independent ( email )

Viktor Steiner

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

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