Do Higher Corporate Taxes Reduce Wages?

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

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.

• Item Type: Paper
• Form of publication: Publisher's Version
• Faculties: Economics > Chairs > Chair for Public Economics
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: H2, H7, J3
• Place of Publication: Mannheim
• Language: English