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Payroll Tax Deduction and Corporation Payroll Arrangement
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TitlePayroll Tax Deduction and Corporation Payroll Arrangement  
AuthorHan Xiaomei, Gong Qihui and Wu Liansheng  
OrganizationNanjing University of Science and Technology; Zhejiang University; Peking University;; 
Key WordsPayroll Tax Deduction; Income Gap; Total Factor Productivity 
AbstractThe income distribution effect of tax policy has been a hot issue for policy maker and academia. Based on the payroll tax deduction reform in 2008, we find that it stimulates corporations to increase the total wage through increasing the average wage and holding the number of staff constant, due to the reducing tax cost of payroll caused by payroll tax deduction reform. Further analyses reveal an increase in employee’s average wage, a reduction in income gap between top management and employee, and an improvement in total factor productivity (TFP) during the post-reform period. The above effects are more pronounced when corporations have lower wage level or have lower cash dividend ratio. In sum, our findings suggest that the payroll tax deduction reform lead to a positive income distribution and then improve the productivity. 
Serial NumberWP1057 
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