IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Sharing the burden? Empirical evidence on corporate tax incidence

  • Dwenger, Nadja
  • Rattenhuber, Pia
  • Steiner, Viktor

This study empirically investigates the direct incidence of the corporate income tax through wage bargaining, using an industry-region level panel data set on all corporations in Germany over the period 1998 to 2006. Our measure of direct incidence for the first time accounts for employment effects which result from tax induced wage changes. Workers share in reductions of the CIT burden; yet, direct incidence is small and confined to 0.19 0.29. Thus, the net effect of wage bargaining on the corporate wage bill, after an exogenous 1 decrease in the CIT burden, is as little as 19 to 29 cents. This is about half of the effect obtained in prior literature under the assumption that employment remained constant. A focus on wages alone leads to an overestimation of direct tax incidence.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://econstor.eu/bitstream/10419/80040/1/VfS_2013_pid_331.pdf
Download Restriction: no

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80040.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:80040
Contact details of provider: Web page: http://www.socialpolitik.org/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Louis N. Christofides & Andrew J. Oswald, 1992. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 985-1002.
  2. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
  3. Rosanne Altshuler & Alan J. Auerbach & Michael Cooper & Matthew Knittel, 2008. "Understanding U.S. Corporate Tax Losses," NBER Working Papers 14405, National Bureau of Economic Research, Inc.
  4. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-37, April.
  5. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
  6. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 227-251.
  7. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
  8. Gaëtan Nicodème, 2002. "Sector and size effects on effective corporate taxation," European Economy - Economic Papers 2008 - 2015 175, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  9. Frank Fossen & Stefan Bach, 2008. "Reforming the German Local Business Tax - Lessons from an International Comparison and a Microsimulation Analysis," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(2), pages 245-272, June.
  10. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2012. "Wages and International Tax Competition," CESifo Working Paper Series 3867, CESifo Group Munich.
  11. 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.
  12. Alan Auerbach, 2006. "Why have Corporate Tax Revenues Declined? Another Look," CESifo Working Paper Series 1785, CESifo Group Munich.
  13. Kevin A. Hassett & Aparna Mathur, 2006. "Taxes and Wages," AEI Economics Working Papers 49824, American Enterprise Institute.
  14. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  15. Fitzenberger, Bernd & Franz, Wolfgang, 1999. "Industry-Level Wage Bargaining: A Partial Rehabilitation--The German Experience," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(4), pages 437-57, September.
  16. Gaëtan Nicodème, 2001. "Computing effective corporate tax rates: comparisons and results," European Economy - Economic Papers 2008 - 2015 153, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  17. Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
  18. Harry J. Holzer & Lawrence F. Katz & Alan B. Krueger, 1988. "Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure," NBER Working Papers 2561, National Bureau of Economic Research, Inc.
  19. 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.
  20. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  21. Stefan Bach & Hermann Buslei & Nadja Dwenger & Frank Fossen, 2008. "Dokumentation des Mikrosimulationsmodells BizTax zur Unternehmensbesteuerung in Deutschland," Data Documentation 29, DIW Berlin, German Institute for Economic Research.
  22. McDonald, Robert L, 2001. "Cross-Border Investing with Tax Arbitrage: The Case of German Dividend Tax Credits," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 617-57.
  23. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
  24. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
  25. 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.
  26. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  27. Leslie G. Godfrey, 1999. "Instrument Relevance in Multivariate Linear Models," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 550-552, August.
  28. Goerke, Laszlo, 1996. "Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(5), pages 549-65, November.
  29. Joeri Gorter & Ruud de Mooij, 2001. "Capital income taxation in Europe; trends and trade-offs," CPB Special Publication 30, CPB Netherlands Bureau for Economic Policy Analysis.
  30. Alison Felix, 2009. "Do state corporate income taxes reduce wages?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 77-102.
  31. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
  32. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
  33. Addison, John T. & Schnabel, Claus & Wagner, Joachim, 2006. "The (Parlous) State of German Unions," IZA Discussion Papers 2000, Institute for the Study of Labor (IZA).
  34. 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.
  35. Frank Blasch & Alfons Weichenrieder, 2006. "When Taxation Changes the Course of the Year – Fiscal Year Adjustments and the German Tax Reform 2000/2001," CESifo Working Paper Series 1861, CESifo Group Munich.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:80040. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.