Dividend Taxes, Employment, and Firm Productivity

29 Pages Posted: 23 Apr 2020

See all articles by Martin Jacob

Martin Jacob

WHU - Otto Beisheim School of Management

Date Written: March 30, 2020

Abstract

The paper examines the effect of dividend taxation on employment and productivity. I exploit a dividend tax cut of 10 percentage points in Sweden for closely held private corporations. Using data on all Swedish closely held firms, with exact information on employees and their wages, I find that, consistent with theory, cash-constrained firms increase productivity by 3% and wages by 2% relative to unconstrained firms whose investment decisions are unaffected by dividend taxes. My findings indicate that dividend taxes constrain firms in investing efficiently. Higher taxes can result in lower capital and labor input and, thus, in substantially lower productivity.

Keywords: Dividend Taxation, Employment, Wages, Productivity

Suggested Citation

Jacob, Martin, Dividend Taxes, Employment, and Firm Productivity (March 30, 2020). Available at SSRN: https://ssrn.com/abstract=3564234 or http://dx.doi.org/10.2139/ssrn.3564234

Martin Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

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D-56179 Vallendar, 56179
Germany

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