Sharing the burden
Dwenger, Nadja ;  Rattenhuber, Pia ;  Steiner, Viktor ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleSharing the burden
Subtitleempirical evidence on corporate tax incidence
AuthorDwenger, Nadja
AuthorRattenhuber, Pia
AuthorSteiner, Viktor
InstitutionUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages37 S.
Series Discussion paper / School of Business & Economics ; 2011/19 : Economics
Keywordstax incidence; wage determination; corporate income taxation; corporate tax return data
Classification (DDC)336 Public finance
AbstractThis study assesses the burden of capital income tax passed onto labor through wage bargaining over economic rents, using estimations based on a unique pseudo-panel data set from Germany for the period 1998 to 2006. Tax return data cover the universe of corporations subject to corporate income tax, and labor market variables reflect the full record of employees covered by Social Security. We find that wage bargaining after a reduction in tax rates does not increase the wage bill if employment effects neglected by previous empirical studies are taken into account. Any increase in the total wage bill by higher wage rates set is equally compensated for by lower levels of employment. If adjustments in employment due to the increased user cost of capital are taken into account, a cut in corporate income taxes by 1 euro increases the wage bill by 0.47 euro. The identification of these effects comes from variation in the firm-specific average corporate tax rate across firms and over time resulting from two substantial tax reforms. The endogeneity of the firmspecific tax rate is controlled for by an instrumental variable approach. The instrument for the observed average tax rate is the counterfactual tax rate that a corporation would have faced in a particular period, had there been no endogenous change of its tax base, constructed using a detailed microsimulation model.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Institut für Wirtschaftspolitik und Wirtschaftsgeschichte
Year of publication2011
Type of documentBook
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Created at2011-12-15 : 11:36:30
Last changed2015-01-22 : 04:40:45
Static URLhttp://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000012615