Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment
Clément Malgouyres, Thierry Mayer, Clément Mazet-Sonilhac
American Economic Review · 2023 · Volume 113 · Issue 8
Abstract
Suarez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative statics omitting a channel implied by their model: the link between common determinants of a location's attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form effects. Assigning consensual values to the unidentified parameters, we find that the incidence share borne by firm owners is closer to 25 percent than 40 percent.
Keywords
Taxation and Subsidies: Incidence, Business Taxes and Subsidies including sales and value-added (VAT), Fiscal Policies and Behavior of Economic Agents: Firm, State and Local Taxation, Subsidies, and Revenue, Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics, Finance in Urban and Rural Economies
Enable JavaScript for citation tools and additional paper interactions.