Corporate taxes, productivity, and business dynamism

0573132 - NHU-C 2024 DE eng V - Research Report
Colciago, A. - Lewis, V. - Matyska, Branka
Corporate taxes, productivity, and business dynamism.
Frankfurt am Main: Deutsche Bundesbank, 2023. 55 s. Deutsche Bundesbank Discussion Papers, 16. ISBN 978-3-95729-947-5. ISSN 2749-2958
Institutional support: Cooperatio-COOP
Keywords : corporate taxation * productivity * firm entry and exit
https://www.bundesbank.de/resource/blob/911498/e871290160e0121c8a2f1e1e3e8c9062/mL/2023-06-15-dkp-16-data.pdf

We identify the e ects of corporate income tax shocks on key US macroeconomic aggregates. In response to a corporate income tax cut, we nd that: (i) labor productivity increases; (ii) entry increases with delay; (iii) exit increases; (iv) total labor increases by more than production labor. To rationalize these empirical findings, we build a New Keynesian model with idiosyncratic rm productivity, and entry and exit. Our model features productivity gains due to selection and cleansing along the entry and exit margins. Models with homogeneous firms fail to account for the selection and cleansing process and produce counterfactual results.
Permanent Link: https://hdl.handle.net/11104/0343598