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Title: Corporate tax avoidance and industry concentration

Author(s): Julien Martin, Mathieu Parenti and Farid Toubal

Publication Date: July 2020

Keyword(s): industry concentration, IRS Audit Probability and Tax avoidance

Programme Area(s): International Trade and Regional Economics and Public Economics

Abstract: This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.

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Bibliographic Reference

Martin, J, Parenti, M and Toubal, F. 2020. 'Corporate tax avoidance and industry concentration'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15060