Wage Incidence of Local Corporate Taxation - Micro Evidence from Germany
In this paper we provide empirical evidence on the wage incidence of the German business tax, which is set at the municipal level. For our analysis, we use very rich administrative linked employer-employee panel data, covering 11 years, and link it to data on the business tax rates of about 11,100 German municipalities. On average 8\% of the municipalities adjust their business tax rate per year. We are thus able to exploit multiple quasi-natural experiments to identify the tax incidence on wages. While the unique German setting allows us to gauge general equilibrium wage effects, the detailed administrative data enables us to estimate heterogeneous incidence effects and to explore different channels of how the business tax burden is passed on. Consistent with our theoretical model, we find a negative direct effect of corporate taxation on wage, arising in a collective wage bargaining context. A one euro increase in the annual tax liabilities yields a 50 cent decrease of the annual wage bill. This burden is borne high- and medium-skilled labor. Furthermore, we show that the general equilibrium effect on wages is negligible in the context of our study due to the high regional labor mobility.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Henrik J. Kleven & Mazhar Waseem, 2013. "Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 669-723.
- Alan J. Auerbach, 2006.
"Who Bears the Corporate Tax? A Review of What We Know,"
in: Tax Policy and the Economy, Volume 20, pages 1-40
National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 2005. "Who Bears the Corporate Tax? A review of What We Know," NBER Working Papers 11686, National Bureau of Economic Research, Inc.
- Liu, Li & Altshuler, Rosanne, 2013.
"Measuring The Burden Of The Corporate Income Tax Under Imperfect Competition,"
National Tax Journal,
National Tax Association, vol. 66(1), pages 215-37, March.
- 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.
- Raj Chetty & Emmanuel Saez, 2013.
"Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients,"
American Economic Journal: Applied Economics,
American Economic Association, vol. 5(1), pages 1-31, January.
- Raj Chetty & Emmanuel Saez, 2009. "Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients," NBER Working Papers 14836, National Bureau of Economic Research, Inc.
- Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-78, June.
- Alison Felix & James R. Hines, Jr., 2009.
"Corporate taxes and union wages in the United States,"
Regional Research Working Paper
RRWP 09-02, Federal Reserve Bank of Kansas City.
- R. Alison Felix & James R. Hines, Jr., 2009. "Corporate Taxes and Union Wages in the United States," NBER Working Papers 15263, National Bureau of Economic Research, Inc.
- Wiji Arulampalam & Michael P Devereux & Giorgia Maffini, 2007.
"The Direct Incidence of Corporate Income Tax on Wages,"
0707, Oxford University Centre for Business Taxation.
- Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
- Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2010. "The Direct Incidence of Corporate Income Tax on Wages," IZA Discussion Papers 5293, Institute for the Study of Labor (IZA).
- Wiji Arulampalam & Michael P Devereux & Giorgia Maffini, 2009. "The Direct Incidence of Corporate Income Tax on Wages," Working Papers 0917, Oxford University Centre for Business Taxation.
- Thomas K. Bauer & Tanja Kasten & Lars-H. Siemers, 2012.
"Business Taxation and Wages: Evidence from Individual Panel Data,"
MAGKS Papers on Economics
201233, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Bauer, Thomas K. & Kasten, Tanja & Siemers, Lars, 2012. "Business Taxation and Wages: Evidence from Individual Panel Data," IZA Discussion Papers 6717, Institute for the Study of Labor (IZA).
- Bauer, Thomas K. & Kasten, Tanja & Siemers, Lars -H.R., 2012. "Business Taxation and Wages – Evidence from Individual Panel Data," Ruhr Economic Papers 351, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Thomas K. Bauer & Tanja Kasten & Lars-H. R. Siemers, 2012. "Business taxation and wages: evidence from individual panel data," Volkswirtschaftliche Diskussionsbeiträge 153-12, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
- Nadja Dwenger & Pia Rattenhuber & Viktor Steiner, 2011.
"Sharing the burden: Empirical evidence on corporate tax incidence,"
sharing_the_burden, Max Planck Institute for Tax Law and Public Finance.
- Dwenger, Nadja & Rattenhuber, Pia & Steiner, Viktor, 2013. "Sharing the burden? Empirical evidence on corporate tax incidence," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80040, Verein für Socialpolitik / German Economic Association.
- Dwenger, Nadja & Rattenhuber, Pia & Steiner, Viktor, 2011. "Sharing the burden: Empirical evidence on corporate tax incidence," Discussion Papers 2011/19, Free University Berlin, School of Business & Economics.
- Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
- R. Alison Felix, 2007. "Passing the burden: corporate tax incidence in open economies," Regional Research Working Paper RRWP 07-01, Federal Reserve Bank of Kansas City.
- Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
- Barth, Erling & Zweimuller, Josef, 1995. " Relative Wages under Decentralized and Corporatist Bargaining Systems," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 369-84, September.
- Holger Alda & Stefan Bender & Hermann Gartner, 2005. "European Data Watch: The linked employer-employee dataset created from the IAB establishment panel and the process-produced data of the IAB (LIAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 327-336.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79916. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.