The direct incidence of corporate income tax on wages

Wiji Arulampalam, Michael Devereux and Giorgia Maffini

European Economic Review, 2012, vol. 56, issue 6, 1038-1054

Abstract: A stylised model is provided to show how the direct effect of corporate income tax on wages can be identified in a bargaining framework using cross-company variation in tax liabilities, conditional on value added per employee. Using data on 55,082 companies located in nine European countries over the period 1996–2003, we estimate the long run elasticity of the wage bill with respect to taxation to be −0.093. Evaluated at the mean, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 49 cents. Only a weak evidence of a difference for multinational companies is found.

Keywords: Effective incidence; Corporate tax (search for similar items in EconPapers)
JEL-codes: H22 H25 H32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (96)

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Related works:
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2010)
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2009)
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:6:p:1038-1054

DOI: 10.1016/j.euroecorev.2012.03.003

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