Corporate taxes and labor market informality evidence from China
This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wa...
| Autores principales: | , , , |
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| Formato: | Artículo preliminar |
| Lenguaje: | Inglés |
| Publicado: |
International Food Policy Research Institute
2024
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| Materias: | |
| Acceso en línea: | https://hdl.handle.net/10568/140480 |
| _version_ | 1855531800646909952 |
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| author | Deng, Guoying Du, Pengcheng Hernandez, Manuel A. Xu, Shu |
| author_browse | Deng, Guoying Du, Pengcheng Hernandez, Manuel A. Xu, Shu |
| author_facet | Deng, Guoying Du, Pengcheng Hernandez, Manuel A. Xu, Shu |
| author_sort | Deng, Guoying |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets.
JEL Codes: H32, H55, J30, J23, H25 |
| format | Artículo preliminar |
| id | CGSpace140480 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2024 |
| publishDateRange | 2024 |
| publishDateSort | 2024 |
| publisher | International Food Policy Research Institute |
| publisherStr | International Food Policy Research Institute |
| record_format | dspace |
| spelling | CGSpace1404802025-12-02T21:02:40Z Corporate taxes and labor market informality evidence from China Deng, Guoying Du, Pengcheng Hernandez, Manuel A. Xu, Shu taxes labour market social security remuneration This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets. JEL Codes: H32, H55, J30, J23, H25 2024-03-18 2024-03-18T18:33:17Z 2024-03-18T18:33:17Z Working Paper https://hdl.handle.net/10568/140480 en Open Access application/pdf International Food Policy Research Institute Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; and Xu, Shu. 2024. Corporate taxes and labor market informality evidence from China. IFPRI Discussion Paper 2244. Washington, DC: International Food Policy Research Institute. https://hdl.handle.net/10568/140480 |
| spellingShingle | taxes labour market social security remuneration Deng, Guoying Du, Pengcheng Hernandez, Manuel A. Xu, Shu Corporate taxes and labor market informality evidence from China |
| title | Corporate taxes and labor market informality evidence from China |
| title_full | Corporate taxes and labor market informality evidence from China |
| title_fullStr | Corporate taxes and labor market informality evidence from China |
| title_full_unstemmed | Corporate taxes and labor market informality evidence from China |
| title_short | Corporate taxes and labor market informality evidence from China |
| title_sort | corporate taxes and labor market informality evidence from china |
| topic | taxes labour market social security remuneration |
| url | https://hdl.handle.net/10568/140480 |
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