Corporate Income Tax, Legal Form of Organization, and Employment

Don Schlagenhauf
Authors registered in the RePEc Author Service: Shi Qi

No 334, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of legal form of organization. A reduction in the corporate income tax burden encourages adoption of the C corporporation legal form, which reduces capital constraints on firms. Improved capital re-allocation increases overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the non-employment rate by up to 7 percent.

Date: 2018
New Economics Papers: this item is included in nep-dge, nep-ent and nep-pbe
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: Corporate Income Tax, Legal Form of Organization, and Employment (2018)
Working Paper: Corporate Income Tax, Legal Form of Organization, and Employment (2017)
Working Paper: Corporate income tax, legal form of organization, and employment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:334

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