Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment

29 Pages Posted: 8 Jan 2021 Last revised: 13 Jul 2021

See all articles by Clément Malgouyres

Clément Malgouyres

Institut des politiques publiques (PSE); Paris School of Economics (PSE)

Thierry Mayer

Sciences Po

Clément Mazet-Sonilhac

Banque de France; Collège de France; SciencesPo - Sciences Po - Department of Economics

Date Written: October 30, 2020

Abstract

Suárez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative-statics omitting a channel implied by their model: the link between common determinants of a location’s attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form estimates. Assigning consensual values to the unidentified parameters, we find that the incidence share born by firm-owners is closer to 25% than the 40% initially reported.

Keywords: incidence, corporate taxation, discrete/continuous models of demand

JEL Classification: H22, H25, H32, H71, R23, R51

Suggested Citation

Malgouyres, Clément and Mayer, Thierry and Mazet-Sonilhac, Clément, Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment (October 30, 2020). Available at SSRN: https://ssrn.com/abstract=3721950 or http://dx.doi.org/10.2139/ssrn.3721950

Clément Malgouyres (Contact Author)

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Thierry Mayer

Sciences Po ( email )

28 Rue des Saint-Peres
Paris, Paris 75006
France

Clément Mazet-Sonilhac

Banque de France ( email )

Paris
France

Collège de France ( email )

11 Place Marcelin Berthelot
Paris, 75231
France

SciencesPo - Sciences Po - Department of Economics ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

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