The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces
This paper investigates the effect of the corporate income tax (CIT) on wages using panel data for Canadian provinces. We find that the CIT has a statistically significant negative effect on wages through its adverse impact on the capital/labour ratio. The empirical results suggest that workers bear...
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ftrepec:oai:RePEc:clh:resear:v:10:y:2017:i:7 2024-04-14T08:15:08+00:00 The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces Kenneth J. McKenzie Ergete Ferede http://econ.ucalgary.ca/manageprofile/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/1-7833135/UCWP_04_2017.pdf unknown http://econ.ucalgary.ca/manageprofile/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/1-7833135/UCWP_04_2017.pdf article ftrepec 2024-03-19T10:39:56Z This paper investigates the effect of the corporate income tax (CIT) on wages using panel data for Canadian provinces. We find that the CIT has a statistically significant negative effect on wages through its adverse impact on the capital/labour ratio. The empirical results suggest that workers bear a significant part of the corporate tax in the form of lower wages. Under the standard assumption that the CIT base is unresponsive to changes in the tax rate, our estimates suggest that the reduction in aggregate wages associated with a $1 increase in provincial corporate tax revenue due to an increase in the statutory CIT rate ranges from 95 Canadian cents for Newfoundland and Labrador to C$1.74 for New Brunswick. Under the more reasonable assumption that the CIT base shrinks in response to an increase in the tax rate, the estimates range from C$1.52 for Alberta to C$3.85 for Prince Edward Island. The results are robust to various sensitivity checks. Article in Journal/Newspaper Newfoundland Prince Edward Island RePEc (Research Papers in Economics) Newfoundland |
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RePEc (Research Papers in Economics) |
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This paper investigates the effect of the corporate income tax (CIT) on wages using panel data for Canadian provinces. We find that the CIT has a statistically significant negative effect on wages through its adverse impact on the capital/labour ratio. The empirical results suggest that workers bear a significant part of the corporate tax in the form of lower wages. Under the standard assumption that the CIT base is unresponsive to changes in the tax rate, our estimates suggest that the reduction in aggregate wages associated with a $1 increase in provincial corporate tax revenue due to an increase in the statutory CIT rate ranges from 95 Canadian cents for Newfoundland and Labrador to C$1.74 for New Brunswick. Under the more reasonable assumption that the CIT base shrinks in response to an increase in the tax rate, the estimates range from C$1.52 for Alberta to C$3.85 for Prince Edward Island. The results are robust to various sensitivity checks. |
format |
Article in Journal/Newspaper |
author |
Kenneth J. McKenzie Ergete Ferede |
spellingShingle |
Kenneth J. McKenzie Ergete Ferede The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
author_facet |
Kenneth J. McKenzie Ergete Ferede |
author_sort |
Kenneth J. McKenzie |
title |
The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
title_short |
The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
title_full |
The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
title_fullStr |
The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
title_full_unstemmed |
The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces |
title_sort |
incidence of the corporate income tax on wages: evidence from canadian provinces |
url |
http://econ.ucalgary.ca/manageprofile/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/1-7833135/UCWP_04_2017.pdf |
geographic |
Newfoundland |
geographic_facet |
Newfoundland |
genre |
Newfoundland Prince Edward Island |
genre_facet |
Newfoundland Prince Edward Island |
op_relation |
http://econ.ucalgary.ca/manageprofile/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/1-7833135/UCWP_04_2017.pdf |
_version_ |
1796313393673535488 |