PlumX Metrics
SSRN
Embed PlumX Metrics

Corporate Tax Cuts and the Decline of the Manufacturing Labor Share

FRB of Cleveland Working Paper No. 22-39
2022
  • 0
    Citations
  • 279
    Usage
  • 1
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    279
    • Abstract Views
      228
    • Downloads
      51
  • Captures
    1
    • Readers
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      782,916

Paper Description

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 micro level. Given the empirical distribution in the US manufacturing sector, our quantitative analysis suggests that corporate tax cuts explain a significant part of the decline in the manufacturing labor share since the 1950s. The shift away from traditionally large, labor-intensive production units raised the concentration of market shares and reduced the concentration of employment.

Bibliographic Details

Barıș Kaymak; Immo Schott

Labor Share of Income; Corporate Taxation; Industry Dynamics; Firm Size Distribution

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know