Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany

Co-Authors: Clemens Fuest and Andreas Peichl

American Economic Review, 2018, Vol. 108(2), pp. 393–418

This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identification. Using event study designs and difference-in-differences models, we find that workers bear about one-half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importance of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young, and female employees bear a larger share of the tax burden. This has important distributive implications.

[Published paper] [Online Appendix] [Slides] [Replication files]

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The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany

Co-Authors: Andereas Lichter and Max Löffler

Journal of the European Economic Association, 2021, Vol. 19(2), pp. 741–789

We investigate the long-run effects of government surveillance on civic capital and economic performance, studying the case of the Stasi in East Germany. Exploiting regional variation in the number of spies and administrative features of the system, we combine a border discontinuity design with an instrumental variables strategy to estimate the long-term, post-reunification effect of government surveillance. We find that a higher spying density led to persistently lower levels of interpersonal and institutional trust in post-reunification Germany. We also find substantial and long-lasting economic effects of Stasi surveillance, resulting in lower income, higher exposure to unemployment, and lower self-employment.

[Published paper] [Supplementary data] [Slides] [Replication files]

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Exporting and Labor Demand: Micro-level evidence from Germany

Co-Authors: Andreas Lichter and Andreas Peichl

It is widely believed that globalization increases the extent of employment and wage responses to economic shocks. In this paper, we investigate the effect of firms’ exporting activities on the wage elasticity of labour demand. Using rich, administrative linked employer–employee panel data from Germany and destination-specific industry level information on trade flows, we explicitly control for self-selection into exporting and endogeneity concerns. Overall, we find that exporting has a significant positive effect on the (absolute value of the) unconditional wage elasticity of labour demand. In line with our hypothesis, we further show that the effect is particularly strong for those plants that export a significant share of their output to low- and medium-income countries, hence face relatively more price-elastic product demand.

Canadian Journal of Economics, 2017, Vol. 151(4), pp. 41-55

The Elasticity of Taxable Income in the Presence of Deduction Possibilities

Co-Authors: Philipp Doerrenberg and Andreas Peichl

Several recent studies show that the elasticity of taxable income (ETI) is not a sufficient statistic for the welfare costs of taxation due to factors such as tax-base shifting. This paper provides an additional argument demonstrating the non-sufficiency of the ETI, namely tax deductions. Building on a theoretical framework which incorporates deductions in a standard optimal-tax model, we show that the ETI is not sufficient for welfare analysis if (i) deductions generate externalities and if (ii) deductions are responsive to tax-rate changes.While the first condition should arguably hold true for the majority of tax deductions, we provide an empirical examination of the second condition. Relying on rich German panel data from administrative tax records, we exploit several tax reforms that were implemented in Germany between 2001 and 2008. Our main estimates indicate an overall ETI between 0.54 and 0.68 and an elasticity of deductions with respect to the net-of-tax rate of about −0.9. These results suggest that the ETI is not sufficient to calculate the welfare cost of taxation.

Journal of Public Economics, 2017, Vol. 151, pp. 41-55

The Own-Wage Elasticity of Labor Demand: A Meta-Regression Analysis

Co-Authors: Andreas Lichter and Andreas Peichl

The own-wage elasticity of labor demand is a key parameter in empirical research and policy analysis. However, despite extensive research, estimates of labor demand elasticities are subject to considerable heterogeneity. In this paper, we explore various dimensions of this heterogeneity by means of a comprehensive meta-regression analysis, building on information from 151 different studies containing 1334 estimates in total. Our results demonstrate heterogeneity in various dimensions and to a considerable extent: the magnitude of the elasticity depends on the theoretical model applied and features of the workforce. Moreover, we find that labor demand has become more elastic over time, and is particularly elastic in countries with low levels of employment protection legislation. Furthermore, we find heterogeneity due to the empirical specification of the labor demand model, characteristics of the dataset and publication bias.

European Economic Review, 2015, Vol. 80, pp. 94-119

Other Publications

Partisan Tax Policy and Income Inequality in the U.S., 1979-2007

Co-Authors: O. Bargain, M. Dolls, H. Immervoll, D. Neumann, A. Peichl and N. Pestel

Economic Inquiry, 2015, Vol. 53(2), pp. 1061–1085

Labor Demand Effects of Rising Electricity Prices: Evidence for Germany

Co-Authors: Michael Cox, Nico Pestel and Andreas Peichl

Energy Policy, 2014, Vol. 74, pp. 266-277

Comparing Inequality Aversion across Countries When Labor Supply Responses Differ

Co-Authors: Oliver Bargain, Mathias Dolls, Dirk Neumann and Andreas Peichl

International Tax and Public Finance, 2014, Vol. 21(5), pp. 845-873

Tax-Benefit Revealed Social Preferences in Europe and the US

Co-Authors: Oliver Bargain, Mathias Dolls, Dirk Neumann and Andreas Peichl

Annals of Economics and Statistics, 2014, Vol. 113/114, pp. 257-289

Is soccer good for you? The motivational impact of big sport events on the unemployed

Co-Author: Philipp Doerrenberg

Economics Letters, 2014, Vol. 123 (1), pp. 66-69

Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US

Co-Authors: Oliver Bargain, Andre Decoster, Mathias Dolls, Dirk Neumann and Andreas Peichl

Social Choice and Welfare, 2013, Vol. 41(4), pp. 789-817

Fiscal Union in Europe? Redistributive and Stabilising Effects of a European Tax-Benefit System and Fiscal Equalisation Mechanism

Co-Authors: O. Bargain, M. Dolls, C. Fuest, D. Neumann, A. Peichl and N. Pestel

Economic Policy, 2013, Vol. 28(75), pp. 375-422

The Politician's Wage Gap - Insights from German Members of Parliament

Co-Authors: Andreas Peichl and Nico Pestel

Public Choice, 2013, Vol. 156(3-4), pp. 653-676

Distributional Consequences of Labor-demand Shocks: The 2008-09 Recession in Germany

Co-Authors: Oliver Bargain, Herwig Immervoll and Andreas Peichl

International Tax and Public Finance, 2012, Vol. 19(1), pp. 118-138

Accounting for Labor Demand Effects in Structural Labor Supply Models

Co-Author: Andreas Peichl

Labour Economics, 2012, Vol. 19(1), pp. 129-138