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Fuest, Clemens; Peichl, Andreas; Siegloch, Sebastian (24. December 2015): Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany. ZEW Discussion Paper No. 16-003
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Abstract

This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities. Administrative linked employer-employee data allows estimating heterogeneous worker and firrm effects. We set up a general theoretical framework showing that corporate taxes can have a negative effect on wages in various labor market models. Using an event study design, we test the predictions of the theory. Our results indicate that workers bear about 40% of the total tax burden. Empirically, we confirm the importance of both labor market institutions and profit shifting possibilities for the incidence of corporate taxes on wages.