Corporate income tax, legal form of organization and employment by Daphne Chen, Shi Qi and Don Schlagenhauf
By: Chen, Daphne
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Contributor(s): Qi, Shi | Schlagenhauf, Don.
Material type: 
ArticlePublisher: 2018Subject(s): IMPUESTO DE SOCIEDADES | REDUCCIONES TRIBUTARIAS | EMPLEO | PRODUCTIVIDAD | ORGANIZACION INDUSTRIAL | MODELOS ECONOMETRICOSOnline resources: Click here to access online
In:
American Economic Journal. Macroeconomics v. 10, n. 4, October 2018, p. 270-304Summary: A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of the legal form of organization. A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on
firms. Improved capital reallocation increases the overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the nonemployment rate by up to 7 percent.
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| OP 2137/2018/2 American Economic Journal : Macroeconomics | OP 2137/2018/3 American Economic Journal : Macroeconomics | OP 2137/2018/4 American Economic Journal : Macroeconomics | OP 2137/2018/4-1 Corporate income tax, legal form of organization and employment | OP 2137/2019/1 American Economic Journal : Macroeconomics | OP 2137/2019/1-1 Fiscal austerity in ambiguous times | OP 2137/2019/2 American Economic Journal : Macroeconomics |
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Resumen.
A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of the legal form of organization. A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on
firms. Improved capital reallocation increases the overall productive efficiency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income tax cut can reduce the nonemployment rate by up to 7 percent.
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