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The Unemployment Puzzle of Corporate Taxation

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  • Horst Feldmann

Abstract

Using annual data on nineteen industrial countries for the period 1979–2005 and a large number of controls, this article is the first to empirically study the impact of corporate taxes on the unemployment rate. In contrast to previous empirical research on the labor demand, investment and growth effects of corporate taxation, which consistently finds adverse effects, the regression results suggest that higher corporate taxes may have a favorable impact, lowering the unemployment rate. The magnitude of the estimated effect is substantial. The results of this study are robust to both endogeneity and numerous variations in specification.

Suggested Citation

  • Horst Feldmann, 2011. "The Unemployment Puzzle of Corporate Taxation," Public Finance Review, , vol. 39(6), pages 743-769, November.
    • Handle: RePEc:sae:pubfin:v:39:y:2011:i:6:p:743-769
    DOI: 10.1177/1091142111423019
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    3. Michael MITSOPOULOS & Theodore PELAGIDIS, 2021. "Labor Taxation And Investment In Developed Countries. The Impact On Employment," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 13-31, June.
    4. Yuya Kikuchi & Toshiki Tamai, 2024. "Unemployment and endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(2), pages 533-551, April.
    5. Antonio Estache & Brigitta Gersey, 2018. "Do Corporate Income Tax Rates Cuts Create Jobs? The European Experience," Working Papers ECARES 2018-01, ULB -- Universite Libre de Bruxelles.
    6. Antonio Estache & Beni Kouevi Gath, 2019. "Corporate Income Taxes and (Un-)Employment in the OECD," Working Papers ECARES 2019-11, ULB -- Universite Libre de Bruxelles.

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