Passing the burden: corporate tax incidence in open economies



Appendix A: Derivation of Mathematical Results


Three-Level Nested CES Production Function


Production function with 4 inputs:


в-

Y

b [aKθ + (1 - a)L ]θ + (1 - b)Lγ


+ (1 - c ) Lβi >


Marginal productivity of labor skill-level 1:


Q               β1Γ O              л

— = (1 - a)bcL [ aKθ + (1 - a)Lθ ] )

L

1


Y

b [ aKθ + (1 - a ) Lθι ]θ


+ (1 - b ) ly2


/

b [ aKθ + (1 - a ) Lθ ]θ + (1 - b ) LY2


У

+ (1 - c ) I


Marginal productivity of labor skill-level 2:


-dQ- = (1 - b ) cL2Y 1)

dL 2


(1-в )

β


L

b [ aKθ + (1 - a ) Lθθ ] ° + (1 - b ) L2


L

b [ aKθ + (1 - a ) Lθi ]" + (1 - b ) L2


Marginal productivity of labor skill-level 3:


— = (1 - c ) L-1)
L 3


(1-в )
в


+ (1 - c ) Lβ3 ^


c b [ aKθ + (1 - a ) Lθθ ] ° + (1 - b ) Ly2


(1-в )

в 1“

Y + (1 - c ) /'■




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