Corporate income tax, legal form of organization, and employment

Daphne Chen (), Shi Qi and Don Schlagenhauf

No 2014-18, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We adopt a dynamic stochastic occupational choice model with heterogeneous agents and evaluate the impact of a potential reduction in the corporate income tax on employment. We show that a reduction in corporate income tax leads to moderate job creation. In the extreme case, the elimination of the corporate income tax would reduce the non-employed population by 5.4 percent. In the model, a reduction in the corporate income tax creates jobs through two channels, one from new entry firms and one from existing firms changing their form of legal organization. In particular, the latter accounts for 85.7 percent of the new jobs created.

Keywords: Corporate Income Taxes; Employment; Firm heterogeneity; Entrepreneurs (search for similar items in EconPapers)
JEL-codes: C54 E10 E69 H25 H32 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-04-03
New Economics Papers: this item is included in nep-acc, nep-dge, nep-law, nep-mac, nep-pbe and nep-pub
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Citations: View citations in EconPapers (10)

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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 (2018)
Working Paper: Corporate Income Tax, Legal Form of Organization, and Employment (2017)
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