55 research outputs found
Do higher corporate taxes reduce wages? : Micro evidence from Germany
Because of endogeneity problems very few studies have been able to identify
the incidence of corporate taxes on wages. We circumvent these problems
by using an 11-year panel of data on 11,441 German municipalities' tax
rates, 8 percent of which change each year, linked to administrative matched
employer-employee data. Consistent with our theoretical model, we find a
negative effect of corporate taxation on wages: a 1 euro increase in tax liabilities
yields a 77 cent decrease in the wage bill. The direct wage effect, arising
in a collective bargaining context, dominates, while the conventional indirect
wage effect through reduced investment is empirically small due to regional labor
mobility. High and medium-skilled workers, who arguably extract higher
rents in collective agreements, bear a larger share of the corporate tax burden
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