Corporate Tax Avoidance and Industry Concentration
Copyright policy )Corporate Tax Avoidance and Industry Concentration
This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.
IRS audit probability, Size Distribution of Firms, Market Structure and Pricing: General, JEL: F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business, H26, D.D2.D21, and Market Performance/L.L1.L11 - Production, Multinational Firms; International Business, tax avoidance, and Market Structure, industry concentration, Tax Evasion, [QFIN]Quantitative Finance [q-fin], ddc:330, L.L1.L11, D40, D4, Economie et finances publiques, and Design/D.D4.D40 - General, 330, JEL: D - Microeconomics/D.D4 - Market Structure, 337, Tax avoidance, Economie industrielle, JEL: H - Public Economics/H.H2 - Taxation, Production, Pricing, and Market Structure; Size Distribution of Firms, and Revenue/H.H2.H26 - Tax Evasion and Avoidance, JEL: L - Industrial Organization/L.L1 - Market Structure, F.F2.F23, H.H2.H26, Economie internationale, Subsidies, Industry Concentration, Industry concentration, L11, Production, International Business, Firm Behavior: Empirical Analysis, D.D4.D40, Tax Avoidance, Firm Strategy, and Market Structure • Size Distribution of Firms, IRS Audit Probability, Multinational Firms, JEL: D - Microeconomics/D.D2 - Production and Organizations/D.D2.D21 - Firm Behavior: Theory, F23, D21, Pricing, D22
IRS audit probability, Size Distribution of Firms, Market Structure and Pricing: General, JEL: F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business, H26, D.D2.D21, and Market Performance/L.L1.L11 - Production, Multinational Firms; International Business, tax avoidance, and Market Structure, industry concentration, Tax Evasion, [QFIN]Quantitative Finance [q-fin], ddc:330, L.L1.L11, D40, D4, Economie et finances publiques, and Design/D.D4.D40 - General, 330, JEL: D - Microeconomics/D.D4 - Market Structure, 337, Tax avoidance, Economie industrielle, JEL: H - Public Economics/H.H2 - Taxation, Production, Pricing, and Market Structure; Size Distribution of Firms, and Revenue/H.H2.H26 - Tax Evasion and Avoidance, JEL: L - Industrial Organization/L.L1 - Market Structure, F.F2.F23, H.H2.H26, Economie internationale, Subsidies, Industry Concentration, Industry concentration, L11, Production, International Business, Firm Behavior: Empirical Analysis, D.D4.D40, Tax Avoidance, Firm Strategy, and Market Structure • Size Distribution of Firms, IRS Audit Probability, Multinational Firms, JEL: D - Microeconomics/D.D2 - Production and Organizations/D.D2.D21 - Firm Behavior: Theory, F23, D21, Pricing, D22
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