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Corporate Tax Avoidance and Sales: Microevidence and Aggregate Implications

Author

Listed:
  • Julien Martin

    (UQAM - Université du Québec à Montréal = University of Québec in Montréal, CEPR - Center for Economic Policy Research)

  • Mathieu Parenti

    (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris)

  • Farid Toubal

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper examines the effect of corporate tax avoidance (CTA) on U.S. firm-level sales and its aggregate implications. In theory, CTA gives a competitive edge to avoiding firms, which affects the distribution of sales in the economy. In practice, we find a causal impact of CTA on firm-level sales using a broad set of measures of tax avoidance and different identification strategies. Combining microestimates and the model, we assess how changes in CTA over the past two decades have shaped the distribution of sales across U.S. industries. Although the effects vary by sector, rising CTA among large firms has reinforced their dominant positions, contributing to increased concentration, in several key industries. This paper was accepted by Maria Guadalupe, business strategy. Funding: Financial support from the ENS Paris-Saclay Booster's program, from the SSHRC [Insight Development Grant 207-2018-2019-Q1-00406], from the UQAM research chair on the local impact of multinationals, and from the Fonds de la Recherche Scientifique – FNRS [Grant No. F.4533.23] is gratefully acknowledged. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.05773 .

Suggested Citation

  • Julien Martin & Mathieu Parenti & Farid Toubal, 2025. "Corporate Tax Avoidance and Sales: Microevidence and Aggregate Implications," Post-Print hal-05492429, HAL.
    • Handle: RePEc:hal:journl:hal-05492429
    DOI: 10.1287/mnsc.2024.05773
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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