Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273728 
Year of Publication: 
2023
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 16/2023
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
We identify the effects of corporate income tax shocks on key US macroeconomic aggregates. In response to a corporate income tax cut, we find that: (i) labor productivity increases; (ii) entry increases with delay; (iii) exit increases; (iv) total labor increases by more than production labor. To rationalize these empirical findings, we build a New Keynesian model with idiosyncratic firm productivity, and entry and exit. Our model features productivity gains due to selection and cleansing along the entry and exit margins. Models with homogeneous firms fail to account for the selection and cleansing process and produce counterfactual results.
Subjects: 
corporate taxation
productivity
firm entry and exit
JEL: 
E62
E32
H25
ISBN: 
978-3-95729-947-5
Document Type: 
Working Paper

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