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  4. February 2018
  5. Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

  • Clemens Fuest
  • Andreas Peichl
  • Sebastian Siegloch
American Economic Review
vol. 108, no. 2, February 2018
(pp. 393-418)
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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.

Citation

Fuest, Clemens, Andreas Peichl, and Sebastian Siegloch. 2018. "Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany." American Economic Review, 108 (2): 393-418. DOI: 10.1257/aer.20130570

Additional Materials

JEL Classification

  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H31 Fiscal Policies and Behavior of Economic Agents: Household
  • H71 State and Local Taxation, Subsidies, and Revenue
  • J16 Economics of Gender; Non-labor Discrimination
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials