NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Incorporation, and Productivity

Robert J. Barro, Brian Wheaton

NBER Working Paper No. 25508
Issued in January 2019, Revised in October 2019
NBER Program(s):Economic Fluctuations and Growth Program, Industrial Organization Program, Public Economics Program, Political Economy Program

Corporate versus pass-through status trades off benefits (perpetual identity, limited liability, public trading, earnings retention) against tax wedges, estimated from U.S. taxes on corporate profits, dividends, and partnership income. In regressions, C-corporate economic shares decline with the wedge and exhibit negative trends related to legal changes for LLCs. A calibrated model, fit to TFP and corporate shares, implies that, for 1958-2013, the declining wedge and gap between corporate and pass-through productivity contributed 0.37% per year of a TFP growth rate of 1.09%. From 1994 to 2004, the falling productivity gap contributed 0.77% per year to the TFP growth of 2.00%.

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Document Object Identifier (DOI): 10.3386/w25508

 
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