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This paper examines the effects of a corporate tax cut aimed at incentivizing domestic production on the within-firm distribution of worker earnings, firm employment, and firm capital investment. We use employee-employer-matched U.S. tax filings and find that after implementation of the Domestic Production Activities Deduction, earnings increased modestly in the middle of the within-firm earnings distribution, but increased sharply at the 99th percentile, especially for small firms. Firms also increased investment and employment. Our results demonstrate the importance of allowing for worker and firm heterogeneity when estimating the wage incidence of corporate taxes.
