1992; Germany has the highest marginal corporate tax rate at 56 percent in 1984 and 1989. The
mean, marginal corporate tax rate in my dataset is 36 percent. For comparison, I also use the
average corporate tax rate in some estimations. These data are obtained from the Statistics of
Income Bulletin and are calculated by dividing the taxable foreign earned income by the foreign
taxes paid by U.S. multinational firms in a foreign country. The average corporate tax rate may
be a more reliable measure of cross-country differences in tax rates because it accounts for
differences in taxable income, credits and depreciation allowances.
Additional data obtained from the LIS include gender and age; each variable is entered as
the average value by education level. Age is included in my regressions as a proxy for
experience. The number of years of education is not available for most individuals, and thus, a
more precise measure of experience is not possible. GDP per capita, value added in industry per
worker and the consumer price index are obtained from the World Development Indicators. All
monetary values are represented in real U.S. dollars (2000 base year). These values have been
calculated using exchange rates and the GDP deflator available from the World Development
Indictors. Summary statistics are provided in Table 2.
4. Results
4.1 Corporate Taxes and Openness
Openness and the corporate tax rate are the two main country characteristics of interest
for this paper. In Section 2 we established that the corporate tax rate should have a negative
impact on the gross wage of workers. The effect of openness is harder to predict ex-ante; the
countries in the dataset are developed countries that are relatively capital-intensive. Thus, as the
economy opens, wages for labor should fall. Table 3 shows the estimated effect of corporate
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