Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/74509 
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper No. 4247
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Because of endogeneity problems very few studies have been able to identify the incidence of corporate taxes on wages. We circumvent these problems by using an 11-year panel of data on 11,441 German municipalities' tax rates, 8 percent of which change each year, linked to administrative matched employer-employee data. Consistent with our theoretical model, we find a negative effect of corporate taxation on wages: a 1 euro increase in tax liabilities yields a 77 cent decrease in the wage bill. The direct wage effect, arising in a collective bargaining context, dominates, while the conventional indirect wage effect through reduced investment is empirically small due to regional labor mobility. High and medium-skilled workers, who arguably extract higher rents in collective agreements, bear a larger share of the corporate tax burden.
Subjects: 
business tax
wage incidence
administrative data
local taxation
JEL: 
H20
H70
J30
Document Type: 
Working Paper
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