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Sector-Specific Unemployment and Corporate Income Tax Incidence: A Geometric Exposition

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  • Leonard F. S. Wang

Abstract

This paper examines the incidence of the corporate income tax using duality theory for a two-sector general equilibrium model in which the economy experiences sector-specific unemployment and perfect capital mobility with a sector-specific rigid-wage in the corporate sector. Utilizing the simple geometry without the complicated mathematical manipulations required in the previous works, we demonstrate that capital always bears more of the corporate tax burden than does labor, while unemployment and national income unambiguously decline.

Suggested Citation

  • Leonard F. S. Wang, 1993. "Sector-Specific Unemployment and Corporate Income Tax Incidence: A Geometric Exposition," The American Economist, Sage Publications, vol. 37(1), pages 64-67, March.
    • Handle: RePEc:sae:amerec:v:37:y:1993:i:1:p:64-67
    DOI: 10.1177/056943459303700108
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    References listed on IDEAS

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    1. Miyagiwa, Kaz, 1988. "Corporate income tax incidence in the presence of sector-specific unemployment," Journal of Public Economics, Elsevier, vol. 37(1), pages 103-112, October.
    2. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    3. repec:bla:econom:v:49:y:1982:i:193:p:69-79 is not listed on IDEAS
    4. A. D. Woodland, 1977. "A Dual Approach to Equilibrium in the Production Sector in International Trade Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 10(1), pages 50-68, February.
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    Cited by:

    1. Horst Feldmann, 2011. "The Unemployment Puzzle of Corporate Taxation," Public Finance Review, , vol. 39(6), pages 743-769, November.

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