for their useful discussions, help and advice. We would also like to thank the participants to the 2 nd Urban Economics workshop at IEB (Barcelona), the Workshop on segregation and discrimination in Sciences-Po (Paris), the 6 th meeting of the Urban Economic Association in Miami, the 3 rd SERC conference at the LSE, the CURE 2011 workshop held in Madrid, the ETSG 2011 conference in Copenhagen, the 3 rd GIST-CEPR conference at Stockholm University, the SIUTE seminar in Lille, the GATE seminar in Saint-Etienne and the Applied Economics Lunch Seminar in Paris School of Economics for their useful comments and suggestions. All remaining errors are ours. This research has benefited from the financial support of the French Ministry of Labour (DARES) and the Secrétariat Général du Comité Interministérielà la Ville. Access to confidential data has been made possible thanks to the CASD, the French center for distant and secured access to data.

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* We would like to thank the participants of the 2013 Concordi conference (in Sévilla, Spain), of the internal seminar at the Banque de France, of the AFSE conference held in Lyon in June 2014, and of the ECOMOD conference held in Bali in July 2014 for their useful comments and suggestions. All remaining errors are ours. We would also like to thank the French Ministry of Higher Education and Research for giving us access to confidential data and organizing regular meeting on research tax credit evaluation.

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Do workers gain from lower business taxes, and why? We estimate how a large French corporate income tax credit is passed on to wages and explore the firm-and employee-level underlying mechanisms. The amount of tax credit firms get depends on their payroll share of workers paid less than a wage threshold. Exposure to the policy thus varies both across workers depending on their wage and across firms depending on their wage structure. Using exhaustive employeremployee data, we find that half of the surplus generated by the reform falls onto workers. Wage gains load on incumbents in high-skill occupations. The wage earnings of low-skill workers -nearly all individually eligible -do not change. This heterogeneous wage incidence is unlikely to be driven by scale effects or skill complementarities. We find that the groups of workers benefiting from wage gains are also more likely to continue working for the same firm. Further, we show that firms do not change their wage-setting behavior in response to the individual eligibility status of workers as there is no bunching in the distribution of entrants' wages. Overall, our results suggest that the wage incidence of firm taxation operates collectively through rent-sharing and benefits workers most costly to replace.