Corporate Tax Avoidance and Industry Concentration
Abstract: This paper argues 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 provide evidence for a causal relationship from firm-level tax avoidance to sales using three alternative strategies. 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.