Working Paper: NBER ID: w15263
Authors: R. Alison Felix; James R. Hines Jr.
Abstract: This paper evaluates the effect of U.S. state corporate income taxes on union wages. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, reflecting that unions and employers share tax savings associated with low tax rates. In 2000 the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate is associated with a 0.36 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 54 percent of the benefits of low tax rates.
Keywords: corporate taxes; union wages; labor economics
JEL Codes: H22; H25; J31; J51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate tax burdens (H22) | demand for labor and capital (J20) |
| lower labor-to-capital ratios (J89) | more pronounced effect of corporate taxes on union wages (J51) |
| state corporate income tax rates (K34) | union wage premiums (J31) |
| corporate tax rates < 4% (K34) | average difference in union and nonunion hourly wages (J31) |