The Direct Incidence of Corporate Income Tax on Wages

Arulampalam, Wiji, Devereux, Michael and Maffini, Giorgia (2012) The Direct Incidence of Corporate Income Tax on Wages. European Economic Review, 56 (6). pp. 1038-1054.

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A stylised model is provided to show how the direct effect of corporate income tax on wages can be identified in a bargaining framework using cross-company variation in tax liabilities, conditional on value added per employee. Using data on 55,082 companies located in nine European countries over the period 1996–2003, we estimate the long run elasticity of the wage bill with respect to taxation to be −0.093. Evaluated at the mean, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 49 cents. Only a weak evidence of a difference for multinational companies is found.

Item Type: Article
Keywords: Effective incidence, Corporate tax
Subject(s): Taxation
Date Deposited: 11 Dec 2018 09:06
Last Modified: 11 Dec 2018 09:06
Funders: n/a

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