Corporate Tax Avoidance and Sales: Micro Evidence and Aggregate Implications

Julien Martin, Mathieu Parenti () and Farid Toubal ()
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Julien Martin: UQAM - Université du Québec à Montréal = University of Québec in Montréal, CEPR - Center for Economic Policy Research
Mathieu Parenti: CEPR - Center for Economic Policy Research, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, CESifo - CESifo
Farid Toubal: CEPR - Center for Economic Policy Research, Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, CESifo - CESifo, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique

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Abstract: This paper examines the effect of corporate tax avoidance (CTA) on U.S. firmlevel sales and its aggregate implications. In theory, CTA gives a competitive edge to avoiding firms, which affects the distribution of sales in the economy. In practice, we find a causal impact of CTA on firm-level sales using a broad set of measures of tax avoidance and different identification strategies. Combining micro-estimates and the model, we assess how changes in CTA over the past two decades have shaped the distribution of sales across U.S. industries. While the effects vary by sector, rising CTA among large firms has reinforced their dominant positions, contributing to increased concentration, in several key industries.

Keywords: IRS Audit Probability; Industry Concentration; Distorted Sales; Tax Avoidance (search for similar items in EconPapers)
Date: 2025-07
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Published in Management Science, 2025

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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-05372511

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