Does government reduction of the corporate income tax rate increase employment? Evidence from China

Shengqiang Zuo, Bangzheng Wu and Jun Feng

International Review of Economics & Finance, 2023, vol. 83, issue C, 365-372

Abstract: Using 2.21 million pieces of data from the National Bureau of Statistics of China's Industrial Enterprises Database, compiled during 1998–2013, we apply a static panel model and a dynamic panel model to build upon previous research by more accurately examining the impact of changes in corporate income tax rate on employment. The endogeneity problem is solved by using a variable set. The empirical results show that reducing the corporate income tax rate can increase the overall employment by affecting employee wages, enterprise debt-to-asset ratio, and enterprise return on assets. Moreover, tax reduction can increase the employment of private and collective enterprises, but it has no significant impact on the employment of state-owned enterprises. Conversely, it can inhibit the employment of foreign, Hong Kong, Macau, and Taiwan enterprises.

Keywords: Corporate income tax; Employment; Conduction mechanism; Enterprise ownership (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:83:y:2023:i:c:p:365-372

DOI: 10.1016/j.iref.2022.09.002

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