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Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment

  • Clément Malgouyres
  • Thierry Mayer
  • Clément Mazet-Sonilhac
American Economic Review
vol. 113, no. 8, August 2023
(pp. 2270-86)
See also: Original paper by Suárez Serrato and Zidar (2016)
See also: Reply by Suárez Serrato and Zidar (2023)

 

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Abstract

Suarez Serrato and Zidar (2016) identify state corporate tax incidence in a spatial equilibrium model with imperfectly mobile firms. Their identification argument rests on comparative statics omitting a channel implied by their model: the link between common determinants of a location's attractiveness and the average idiosyncratic productivity of firms choosing that location. This compositional margin causes the labor demand elasticity to be independent from the product demand elasticity, impeding the identification of incidence from the four estimated reduced-form effects. Assigning consensual values to the unidentified parameters, we find that the incidence share borne by firm owners is closer to 25 percent than 40 percent.

Citation

Malgouyres, Clément, Thierry Mayer, and Clément Mazet-Sonilhac. 2023. "Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms: Comment." American Economic Review, 113 (8): 2270-86. DOI: 10.1257/aer.20201753

Additional Materials

JEL Classification

  • H22 Taxation and Subsidies: Incidence
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H32 Fiscal Policies and Behavior of Economic Agents: Firm
  • H71 State and Local Taxation, Subsidies, and Revenue
  • R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
  • R51 Finance in Urban and Rural Economies