Linda Wu

Job Market Paper

• Behavioral Responses to Estate Taxation: Evidence from Taiwan (with Tzu-Ting Yang)
  Abstract: We quantify behavioral responses to estate taxation by exploiting two large reforms in Taiwan. Using comprehensive administrative data and a difference-in-difference design, we show that the response of reported estates to the reforms is quick, persistent, and exhibits an asymmetry. We estimate elasticities of reported estates with respect to the net-of-tax rate of 2.76 (s.e. 0.39) for the tax increase and 1.31 (s.e. 0.16) for the tax cut. The asymmetry arises because liquid items such as financial assets, deposit savings, and charitable exemptions respond significantly more to a tax increase. The quick adjustments in reported estates, combined with a null effect on labor supply behavior among both donors and heirs, suggest the responses are likely driven by tax avoidance. The observed asymmetry can be explained by tax avoidance with sunk costs: taxpayers increase avoidance during a tax increase but are less responsive to a tax cut due to previously incurred avoidance costs. We set up a tax avoidance model and derive sufficient statistics, characterized by our estimated elasticities, to assess the welfare impact of tax reforms. Our analysis shows that using the tax cut elasticity, which is attenuated due to sunk costs, would underestimate the welfare cost and overestimate the net welfare effect of a tax increase by 61%.
  
  

Working Paper

• Family Businesses, Nepotism, and Productivity (with Hsien-Ming Lien)
  Abstract: This paper provides the first systematic evidence on kinship networks within and across businesses by linking comprehensive administrative data on family ties, firm ownership, firm-to-firm transactions, and employer-employee records for the universe of firms in Taiwan. The unique dataset enables us to document the importance of family connections both within and across firms. We find that 40% of firms employ a family member, and 32% have a family member who owns another firm. When two firms are owned by members of the same family, there is a 25% likelihood that they will trade, with transaction values higher than those between non-family trading partners. These patterns suggest that family ties contribute to shaping business networks, and raise questions about their impact on firm performance. Using a stacked event study design, we examine the effects of ownership transfers on firm performance, distinguishing between transfers to children or spouses, more distant family members, and unrelated individuals. Our findings show that while firms transferred within family experienced little change in sales, firms transferred to unrelated individuals increased sales by over 13%. The improvement can be attributed to the restructuring of employee and supply chain networks, as firms recruit more new employees and establish new supplier-buyer relationships.

Selected work in progress

• Formal Labor Market Dynamics in Developing Countries (with Anne Brockmeyer, François Gerard, Gabriel Ulyssea, Coauthors)
  Abstract: We study the dynamics of formal employment, using matched employer-employee panels from ten countries at different income levels, and from across states in Brazil and Colombia. We show that increases in formality rates with development are driven by the extensive rather than the intensive margin of formal employment. Countries and regions with higher formality exhibit a higher rate of job-to-job switches and higher returns to tenure. As a result, formal workers in these regions experience higher life-cycle wage growth.
  
  

• Job Creation and Wage Choice of Japanese Multinational Enterprises in Vietnam (with Jonas Hjort, Yukiko Saito, Yasuka Tateishi)
  Abstract: How do multinational enterprises (MNEs) make decisions on employment and wages for their subsidiaries abroad? Firms that invest in developing countries often take advantage of wage gaps to reduce labour costs. However, little is known about how they adjust sourcing costs when low- or middle-income countries experience higher wage growth than high-income countries. We construct a comprehensive firm-level dataset that links Japanese headquarters with their Vietnamese subsidiaries. Leveraging quasi-experimental wage shocks in Vietnam, we explore the interplay of employment and wage dynamics among Japanese MNEs and their Vietnamese subsidiaries, as well as other MNEs and domestic Vietnamese firms.
  
  

• A Double-Edged Sword or Double Taxation? The Efficiency-Equity Tradeoff of Corporate and Dividend Income Taxation
  Abstract: Over the past three decades, many countries have transitioned from a dividend imputation tax system, where corporate and dividend taxes are unified to avoid double taxation, to a dual system, taxing corporate profits and dividends separately. While this shift is often justified as a means to raise public finance and promote redistribution, some worry that the double taxation burden could discourage investment. However, empirical evidence on the efficiency-equity tradeoff of the two systems is lacking. Using two major Taiwanese reforms, we examine firms' dividend payouts, investment behaviors, and within-firm income distribution to explore this efficiency-equity tradeoff.
  
  

• The Gender of Inherited Wealth
  Abstract: This study investigates intergenerational wealth transfers by tracking accumulated lifetime gifts and inheritances over an individual's lifetime. We document that daughters inherit less wealth than sons, and when they do, it is more likely to be liquid assets.  Exploring variations in family structure and timing of receipts, we quantify how inherited wealth contributes to the gender wealth gap.

Teaching

• Applied Economics 2020/21, 2021/22, 2022/23 (TA for Prof. Duli Li)

• Economics Independent Research 2021/22, 2022/23 (Lead TA for Prof. Silvia Dal Bianco and Prof. Ramin Nassehi)

• Economics Skills Lab 2021/22, 2022/23 (Lead TA for Prof. Silvia Dal Bianco)