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Working Paper
Tax Heterogeneity and Misallocation
Companies face different effective marginal tax rates on their income. This can be detrimental to allocative efficiency unless taxes offset other distortions in the economy. This paper estimates the effect of tax rate heterogeneity on aggregate productivity in distorted economies with multiple frictions. Using firm-level balance-sheet data and estimates of marginal tax rates, we find that tax heterogeneity reduces total factor productivity by about 3 percent. Our findings highlight the positive correlation between marginal tax rates and other distortions to capital and especially labor. This ...
Journal Article
Do Higher Markups Lower Labor’s Share of Income?
Higher price markups are typically associated with larger profits at the expense of labor's share of income. In this Economic Commentary, we challenge this view. The key to our argument is the reallocation of market shares toward labor-intensive firms, a reallocation caused by an increase in the prices of capital goods as a result of higher markups.
Working Paper
Corporate tax cuts and the decline of the manufacturing labor share
We document a strong empirical connection between corporate taxation and the manufacturing labor share, both in the US and across OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. The tax elasticity of the labor share depends on the joint distribution of labor intensities and value added at the ...
Working Paper
Corporate Tax Cuts and the Decline of the Manufacturing Labor Share
We document a strong empirical connection between corporate taxation and the manufacturing labor share, both in the US and across OECD countries. Our estimates associate 30 percent to 60 percent of the observed decline in labor shares with the fall in corporate taxation. Using an equilibrium model of an industry where firms differ in their capital intensities, we show that lower corporate tax rates reduce the labor share by raising the market share of capital-intensive firms. The tax elasticity of the labor share depends on the joint distribution of labor intensities and value added at the ...