Abstract
Using 2.21 million pieces of data from the National Bureau of Statistics of China's Industrial Enterprises Database, compiled during 1998–2013, we apply a static panel model and a dynamic panel model to build upon previous research by more accurately examining the impact of changes in corporate income tax rate on employment. The endogeneity problem is solved by using a variable set. The empirical results show that reducing the corporate income tax rate can increase the overall employment by affecting employee wages, enterprise debt-to-asset ratio, and enterprise return on assets. Moreover, tax reduction can increase the employment of private and collective enterprises, but it has no significant impact on the employment of state-owned enterprises. Conversely, it can inhibit the employment of foreign, Hong Kong, Macau, and Taiwan enterprises.
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