Corporate Tax Avoidance and Industry Concentration

55 Pages Posted: 13 Aug 2020

See all articles by Julien Martin

Julien Martin

University of Quebec at Montreal (UQAM)

Mathieu Parenti

Catholic University of Louvain (UCL)

Farid Toubal

Université Paris Dauphine; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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

Martin, Julien and Parenti, Mathieu and Toubal, Farid, Corporate Tax Avoidance and Industry Concentration (2020). CESifo Working Paper No. 8469, Available at SSRN: https://ssrn.com/abstract=3671255 or http://dx.doi.org/10.2139/ssrn.3671255

Julien Martin (Contact Author)

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Mathieu Parenti

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Farid Toubal

Université Paris Dauphine ( email )

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Paris, Cedex 16 75775
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

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Paris Cedex 15, F-75015
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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