Do Higher Corporate Taxes Reduce Wages?

Clemens Fuest, Andreas Peichl and Sebastian Siegloch

No 9606, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities. Administrative linked employer-employee data allows estimating heterogeneous worker and firm effects. We set up a general theoretical framework showing that corporate taxes can have a negative effect on wages in various labor market models. Using an event study design, we test the predictions of the theory. Our results indicate that workers bear about 40% of the total tax burden. Empirically, we confirm the importance of both labor market institutions and profit shifting possibilities for the incidence of corporate taxes on wages.

Keywords: administrative data; wage incidence; business tax; local taxation (search for similar items in EconPapers)
JEL-codes: H2 H7 J3 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2015-12
New Economics Papers: this item is included in nep-acc, nep-lma, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published - revised version published in: American Economic Review, 2018, 108 (2), 393 - 418

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