AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
A Simple Model of Corporate Tax Incidence
AEA Papers and Proceedings
vol. 114,
May 2024
(pp. 352–57)
Abstract
We analyze the incidence of a linear corporate tax using a simple and portable competitive general equilibrium model in which capital owners choose to invest either in domestic production or a foreign investment opportunity and workers make extensive margin labor supply decisions. Our analysis explores the effect of corporate taxation on wages, employment, domestic profits, and domestic investment. Analytical results and numerical simulations generate insights in line with recent empirical evidence on corporate tax incidence: the burden of the corporate tax is shared between workers and firms, with larger responses among more capital-intensive firms.Citation
Swonder, Dustin, and Damián Vergara. 2024. "A Simple Model of Corporate Tax Incidence." AEA Papers and Proceedings, 114: 352–57. DOI: 10.1257/pandp.20241096Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- H22 Taxation and Subsidies: Incidence
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials
- L25 Firm Performance: Size, Diversification, and Scope