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Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms

Juan Carlos Suárez Serrato () and Owen Zidar

American Economic Review, 2016, vol. 106, issue 9, 2582-2624

Abstract: This paper estimates the incidence of state corporate taxes on the welfare of workers, landowners, and firm owners using variation in state corporate tax rates and apportionment rules. We develop a spatial equilibrium model with imperfectly mobile firms and workers. Firm owners may earn profits and be inframarginal in their location choices due to differences in location-specific productivities. We use the reduced-form effects of tax changes to identify and estimate incidence as well as the structural parameters governing these impacts. In contrast to standard open economy models, firm owners bear roughly 40 percent of the incidence, while workers and landowners bear 30-35 percent and 25-30 percent, respectively.

JEL-codes: H22 H25 H32 H71 R23 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20141702
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Working Paper: Who benefits from state corporate tax cuts? A local labour markets approach with heterogeneous firms (2015) Downloads
Working Paper: Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms (2014) Downloads
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Handle: RePEc:aea:aecrev:v:106:y:2016:i:9:p:2582-2624