FBA SEMINAR SERIES
Tax Cuts, Firm Growth, and Worker Earnings: Evidence from Small Businesses in Canada
Mr. Yige DUAN, PhD Candidate in Economics, University of British Columbia
Date: 9 March 2023 (Thursday)
Time: 10:30am – 11:30am
Venue: Online via Zoom
Host: Prof. Yan LIN, Assistant Professor of Business Intelligence and Analytics
Zoom Link: https://umac.zoom.us/j/98820713309
This paper assesses the effects of corporate tax reductions for small businesses on their growth and employee earnings. Following a 2014 reform in Quebec, Canada, ﬁrms that received tax cuts increase their employment, payrolls, and capital stock by 1.7 percent, 2.3 percent, and 3.2 percent, respectively, relative to unaffected ﬁrms. In turn, these ﬁrms experience 5.2 percent, 0.4 percentage points, and 890 dollars increases in their sales, proﬁt margins, and EBITDA per worker. Furthermore, annual earnings increase by 1.3 percent for workers in treated ﬁrms relative to workers in control ﬁrms. We estimate that workers without ownership in their own ﬁrms bear about a third of corporate tax burdens, and combined workers (with or without ownership) bear about three quarters of the tax burdens. Additionally, the effects are larger for ﬁrms and workers in high-growth and high-tech industries, suggesting a cash-ﬂow channel playing an important role behind our results. Taken together, these ﬁndings suggest that tax incentives designed for small businesses may lead to signiﬁcant increases in their growth and worker earnings, and targeting a speciﬁc sector or industry when designing corporate tax cuts may be an effective way to stimulate growth and employment in the economy.
Mr. Yige DUAN is a PhD candidate in Economics at University of British Columbia. He obtained a Master of Science (MSc)’s degree in Economics from National University of Singapore. He then worked as a pre-doc research assistant at the National University of Singapore. His research foci are labor and urban economics. His article appeared on Management Science.
All are welcome!