Date(s) - 09/18/2017
12:00 pm - 1:00 pm
Categories No Categories
The Brown Bag Seminar Series offers current ECON and DARE graduate students the opportunity to present ongoing research or to workshop new ideas. The seminars are held on Monday from 12:00-1:00pm in Clark C307 and are open to everyone.
For Monday, 9/18/17’s seminar economics graduate student Eliakim Kakpo will be presenting the topic: The corporate tax, wages, market power and profit shifting: Evidence using policy discontinuity at state borders.
This paper studies the responsiveness of wages and employment to changes in state corporate tax rates. We investigate the extent to which the degree of market competition proxied here by the number of firms, and legislation on state combined reporting agreement alters the wage elasticity to the tax. Our analysis exploits policy discontinuity at state border by pairing counties located in states featuring a tax change with their contiguous counterparts located in control states. Corporate tax reforms are treated as exogenous from the perspective of a contiguous county. It is found that corporate tax cuts do not boost employment or wages while tax hikes reduce employment, wages and income. The incidence of a tax hike on employment strengthens along border segments with a differential treatment of combined reporting while the responsiveness of wages to a hike increases along border segments with no combined reporting agreement. While controlling for the extent of competition, we observe that the wage sensitivity to a one percent tax hike decreases with the number of firms, ranging from -0.17 percent at the first quartile to -0.13 percent at the median of our market competition metric.