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Incorporation, and Productivity

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  • Robert J. Barro
  • Brian Wheaton

Abstract

Corporate versus pass-through status trades off benefits (perpetual identity, limited liability, public trading, earnings retention) against tax wedges, estimated from U.S. taxes on corporate profits, dividends, and partnership income. In regressions, C-corporate economic shares decline with the wedge and exhibit negative trends related to legal changes for LLCs. A calibrated model, fit to TFP and corporate shares, implies that, for 1958-2013, the declining wedge and gap between corporate and pass-through productivity contributed 0.37% per year of a TFP growth rate of 1.09%. From 1994 to 2004, the falling productivity gap contributed 0.77% per year to the TFP growth of 2.00%.

Suggested Citation

  • Robert J. Barro & Brian Wheaton, 2019. "Incorporation, and Productivity," NBER Working Papers 25508, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25508
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    1. Robert J. Barro & Brian Wheaton, 2020. "Taxes, Incorporation, and Productivity," Tax Policy and the Economy, University of Chicago Press, vol. 34(1), pages 91-111.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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