The Direct Incidence of Corporate Income Tax on Wages

Wiji Arulampalam, Michael P. Devereux () and Giorgia Maffini ()
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Michael P. Devereux: University of Oxford
Giorgia Maffini: University of Oxford
Authors registered in the RePEc Author Service: Michael P. Devereux and Michael B. Devereux

No 5293, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the extent to which taxes on corporate income are directly shifted onto the workforce. We use data on 55,082 companies located in nine European countries over the period 1996-2003. We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that the long run elasticity of the wage bill with respect to taxation is -0.093. Evaluated at the mean, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 49 cents. We find only weak evidence of a difference for multinational companies.

Keywords: wage bargaining; effective incidence; income tax (search for similar items in EconPapers)
JEL-codes: H22 H25 J50 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2010-10
New Economics Papers: this item is included in nep-acc and nep-pub
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Citations: View citations in EconPapers (17)

Published - published in: European Economic Review, 2012, 56 (6), 1038-1054

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Related works:
Journal Article: The direct incidence of corporate income tax on wages (2012)
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2009)
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2007)
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