Economic Integration, Corporate Tax Incidence and Fiscal Compensation

Nelly Exbrayat and Benny Geys

No 1534, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: Higher corporate taxes are often argued to depress wages (a tax incidence effect), while higher wages may require compensation via lower corporate tax rates (a fiscal compensation effect). Yet, existing empirical evidence ignores that i) both effects are likely to occur simultaneously (necessitating a joint estimation approach), and ii) capital mobility might play a critical moderating role for the strength of both effects. Using a panel dataset comprising 24 OECD countries over the period 1982-2007, we address both these deficiencies. This clearly illustrates the simultaneous existence of tax incidence and fiscal compensation effects. Moreover, capital mobility (and the ensuing relative bargaining power of economic agents) has a significant influence on both the prevalence and strength of these effects.

Keywords: Tax Incidence; Fiscal Compensation; Corporate taxation; Wage bargaining; Capital mobility (search for similar items in EconPapers)
JEL-codes: H22 H25 H32 J21 J31 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-acc, nep-lma and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Economic Integration, Corporate Tax Incidence and Fiscal Compensation (2016)
Working Paper: Economic Integration, Corporate Tax Incidence and Fiscal Compensation (2016)
Working Paper: Economic Integration, Corporate Tax Incidence and Fiscal Compensation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1534

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