Dividend Taxes, Employment, and Firm Productivity

52 Pages Posted: 23 Apr 2020 Last revised: 7 Jul 2021

See all articles by Martin Jacob

Martin Jacob

WHU - Otto Beisheim School of Management

Date Written: July 7, 2020

Abstract

The paper examines the effect of dividend taxation on employment and productivity. I exploit a dividend tax cut of 10 percentage points for closely held private corporations in Sweden. Using data on all closely held Swedish firms with exact information on employees and their wages, I find that firms with limited internal funds increase productivity and wages relative to firms with sufficient internal funds whose investment decisions are less affected by dividend taxes. My findings indicate that dividend taxes constrain firms in investing efficiently. Lower taxes can result in higher capital and labor input and, thus, in higher productivity.

Keywords: Dividend Taxation, Employment, Wages, Productivity

Suggested Citation

Jacob, Martin, Dividend Taxes, Employment, and Firm Productivity (July 7, 2020). TRR 266 Accounting for Transparency Working Paper Series No. 35, 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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