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1. Labor Market Power

   https://doi.org/10.1257/aer.20191521  

   Berger, David; Herkenhoff, Kyle; Mongey, Simon (April 2022, American Economic Review)

   We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms’ local labor market share and their employment and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on imperfect productivity-wage pass-through and strategic wage setting of dominant employers. Relative to the efficient allocation, welfare losses from labor market power are 7.6 percent, while output is 20.9 percent lower. Lastly, declining local concentration added 4 percentage points to labor’s share of income between 1977 and 2013. (JEL E25, H71, J24, J31, J42, R23) 

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2. Lessons from the Biggest Business Tax Cut in US History

   https://doi.org/10.1257/jep.38.3.61  

   Chodorow-Reich, Gabriel; Zidar, Owen; Zwick, Eric (August 2024, Journal of Economic Perspectives)

   Williams, Heidi (Ed.)

   We assess the business provisions of the 2017 Tax Cuts and Jobs Act, the biggest corporate tax cut in US history. We draw five lessons. First, corporate tax revenue fell by 40 percent due to the lower rate and more generous expensing. Second, firms with larger declines in their effective tax wedge increased investment relatively more. In aggregate, we suggest a loose consensus from the literature that total tangible corporate investment increased by 11 percent. Third, the business tax provisions increased economic growth and wages by less than advertised by the Act’s proponents, with long-run GDP higher by less than 1 percent and labor income by less than $1,000 per employee. Fourth, provisions that increase foreign investment by US-based multinationals also boost their domestic operations. Fifth, some of the expired and expiring provisions, such as accelerated depreciation, generate more investment per dollar of tax revenue than others. 

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3. Taxation and Innovation in the Twentieth Century

   https://doi.org/10.1093/qje/qjab022  

   Akcigit, Ufuk; Grigsby, John; Nicholas, Tom; Stantcheva, Stefanie (June 2021, The Quarterly Journal of Economics)

   Abstract This article studies the effect of corporate and personal taxes on innovation in the United States over the twentieth century. We build a panel of the universe of inventors who patented since 1920, and a historical state-level corporate tax database with corporate tax rates and tax base information, which we link to existing data on state-level personal income taxes and other economic outcomes. Our analysis focuses on the effect of personal and corporate income taxes on individual inventors (the micro level) and on states (the macro level), considering the quantity and quality of innovation, its location, and the share produced by the corporate rather than the noncorporate sector. We propose several identification strategies, all of which yield consistent results. We find that higher taxes negatively affect the quantity and the location of innovation, but not average innovation quality. The state-level elasticities to taxes are large and consistent with the aggregation of the individual-level responses of innovation produced and cross-state mobility. Corporate taxes tend to especially affect corporate inventors’ innovation production and cross-state mobility. Personal income taxes significantly affect the quantity of innovation overall and the mobility of inventors. 

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4. Tax Administration versus Tax Rates: Evidence from Corporate Taxation in Indonesia

   https://doi.org/10.1257/aer.20201237  

   Basri, M. Chatib; Felix, Mayara; Hanna, Rema; Olken, Benjamin A. (December 2021, American Economic Review)

   We compare two approaches to increasing tax revenue: tax administration and tax rates. We show that when Indonesia moved top regional firms into “medium taxpayer offices,” with high staff-to-taxpayer ratios, tax revenue more than doubled. Examining nonlinear changes to corporate income tax rates, we estimate an elasticity of taxable income of 0.579. Combining these estimates, improved tax administration is equivalent to raising top rates on all firms by 8 percentage points. On net, improved tax administration can have significant returns for developing countries. (JEL H25, H26, K34, O17) 

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5. Distilling the Interplay Between Corporate Environmental Management, Financial, and Emissions Performance: Evidence From U.S. Firms

   https://doi.org/10.1109/TEM.2020.3040158  

   Ogunrinde, Olawale; Shittu, Ekundayo; Dhanda, Kanwalroop Kathy (December 2020, IEEE Transactions on Engineering Management)

   This article investigates the relationship between firms’ carbon intensity, carbon management practices, and their financial performance. The extant literature on firms’ financial performance and their environmental performance has mostly considered a single dimension of firms’ environmental performance leading to restricted, and often, mixed outcomes. With panel data collected on financial statements and climate change related activities from 136 corporate firms in the U.S. between 2011 and 2018, this article integrates a process dimension based on an environmental management score with an outcome dimension represented by firms’ carbon emissions intensity. A regression model is employed to investigate the relationships between corporate environmental performance and corporate financial performance. We find evidence of a nonlinear relationship between corporate firms’ environmental performance and financial performance across both high and low-carbon intensive sectors. Specifically, we find that for firms in the high-carbon intensive sector, a U-shaped relationship exists between firms’ corporate environmental performance outcome dimension and their financial performance while for the low-carbon intensive sector, the converse is the case. The results show that the interaction between the outcome dimension of environmental performance and financial performance is moderated by the process dimension of environmental performance for firms in the low- and high-carbon intensive sectors. 

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