Arulampalam, Wiji, Devereux, Michael P. and Maffini, Giorgia (2010) The direct incidence of corporate income tax on wages. Working Paper. Bonn: Institute for the Study of Labor (IZA). (IZA Discussion Papers. (Unpublished)

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Abstract

We examine the extent to which taxes on corporate income are directly shifted onto the workforce. We use data on 55,082 companies located in nine European countries over the period 1996-2003. We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that the long run elasticity of the wage bill with respect to taxation is -0.093. Evaluated at the mean, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 49 cents. We find only weak evidence of a difference for multinational companies.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Series Name:	IZA Discussion Papers
Publisher:	Institute for the Study of Labor (IZA)
Place of Publication:	Bonn
Date:	October 2010
Number:	No.5293
Number of Pages:	46
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Access rights to Published version:	Open Access
Funder:	Hundred Group, ETPF, Economic and Social Research Council (ESRC)
Grant number:	RES-062-23-0163
Related URLs:	Publisher
URI:	http://wrap.warwick.ac.uk/id/eprint/45561

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