Employment Effects of Local Business Taxes

Sebastian Siegloch

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This is the first paper to thoroughly investigate the employment effects of corporate taxation. Higher taxes are theoretically shown to have a negative impact on employment through reduced investments, if labor is regionally mobile. I test this prediction by exploiting the specific setting of the German local business tax, where on average 10% of the 11,441 German municipalities change their tax rate each year. Relying on rich administrative linked employer-employee panel data, I provide non-parametric and parametric evidence that employment declines if corporate tax rates increase. For given wages, a one euro increase in the tax bill of corporate firms leads to a reduction in the wage bill by 30 cents over two years. I show empirically that the negative employment effect is triggered by reduced net investments and that workers are mobile within labor market regions.

JEL-codes: H22 H25 J21 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/100325/1/VfS_2014_pid_433.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100325

Access Statistics for this paper

More papers in VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).