Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany
83 Pages Posted: 6 Jun 2013
Date Written: September 2017
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 differences-in-differences models, we find that workers bear about 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.
Keywords: business tax, wage incidence, administrative data, local taxation
JEL Classification: H200, H700, J300
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