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American Economic Review Vol. 108 No. 2 2018

Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

Clemens Fuest1; Andreas Peichl2; Sebastian Siegloch3

1 ifo Institute, University of Munich, Poschingerstr. 5, 81679 Munich, Germany, and CESifo (email: ) · 2 ifo Institute, University of Munich, Poschingerstr. 5, 81679 Munich, Germany, CESifo, IZA, and ZEW (email: ) · 3 University of Mannheim, L7, 3-5, 68161 Mannheim, Germany, IZA, ZEW, and CESifo (email: )

Abstract

This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identification. Using event study designs and difference-in-differences models, we find that workers bear about one-half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importance of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young, and female employees bear a larger share of the tax burden. This has important distributive implications.

DOI
10.1257/aer.20130570
Volume
108
Issue
2
Pages
393-418
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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