Corporate Tax Avoidance and Industry Concentration
55 Pages Posted: 13 Aug 2020
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Corporate Tax Avoidance and Industry Concentration
Corporate Tax Avoidance and Industry Concentration
Date Written: 2020
Abstract
This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.
Keywords: tax avoidance, industry concentration, IRS audit probability
JEL Classification: D220, H260, L110, D400, F230
Suggested Citation: Suggested Citation