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Corporate taxes and union wages in the United States

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  • Alison Felix
  • James R. Hines, Jr.

Abstract

This paper evaluates the effect of U.S. state corporate income taxes on union wages. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates.

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File URL: http://www.kansascityfed.org/Publicat/RegionalRWP/RRWP09-02.pdf
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Bibliographic Info

Paper provided by Federal Reserve Bank of Kansas City in its series Regional Research Working Paper with number RRWP 09-02.

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Date of creation: 2009
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Handle: RePEc:fip:fedkrr:rrwp09-02

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  1. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  2. Wiji Arulampalam & Michael P Devereux & Giorgia Maffini, 2007. "The Direct Incidence of Corporate Income Tax on Wages," Working Papers 0707, Oxford University Centre for Business Taxation.
  3. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2005. "Wages and International Rent Sharing in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 73-84, February.
  4. John M. Abowd & Thomas Lemieux, 1991. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," NBER Working Papers 3808, National Bureau of Economic Research, Inc.
  5. John W. Budd & Matthew J.Slaughter, 2000. "Are Profits Shared Across Borders? Evidence on International Rent Sharing," NBER Working Papers 8014, National Bureau of Economic Research, Inc.
  6. Bernt Bratsberg & James F. Ragan & Jr, 2002. "Changes in the union wage premium by industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 65-83, October.
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Cited by:
  1. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2012. "Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany," Working Papers 1216, Oxford University Centre for Business Taxation.
  2. Li Liu & Rosanne Altshuler, 2011. "Measuring the burden of the corporate income tax under imperfect competition," Working Papers 1105, Oxford University Centre for Business Taxation.

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