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ONLINE – Applied Micro Workshop – Uta Schönberg, “The Effects of Changes in Business Taxation on Firms, Workers and Local Labor Markets”

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Mimosa DiStefano, Christian Dustmann, and Uta Schönberg: “The Effects of Changes in Business Taxation on Firms, Workers and Local Labor Markets” This paper provides comprehensive analysis how firms, workers and local labor markets adjust to changes in business tax rates. We focus on Germany where taxes on profits that apply to both incorporated and unincorporated firms are set at the municipality level, and where there is considerable variation both across municipalities and over time. We show that an increase in the business tax rate by 1% reduces municipality employment by 0.35%, municipality wages by 0.12% and establishment wages by 0.065%. Employment decreases particularly strongly in high-wage and large establishments—that is, establishments located higher up the job ladder—explaining why municipality wages decline by more than establishment wages following a business tax hike. Moreover, higher business tax rates lower mobility between establishments, by reducing both firm separations and new hires. This leads to a reduction in between-job wage growth in affected municipalities, thus suggesting reduced mobility of workers between firms as a key factor in explaining wage reductions in municipalities that experienced an increase in business taxes.

Event details
What
  • Presentation
When Nov 24, 2020
from 16:00 to 17:30
Where Zoom URL TBA via mailing list
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