Using Korean firm-level data from 1986 to 2012, this research report empirically analyzes the effect of corporate tax burden on firms’ investment and employment and gives policy implications. We estimate an average and marginal effective tax rate and, then, construct an investment model based on Tobin’s Q and an employment model which is present in form of an unbalanced dynamic panel regression model. To solve the problem of endogeneity, we apply the first-difference GMM and system GMM suggested by Arellano and Bond (1991) and Blundell and Bond (1998), respectively. Our empirical results are compared to the first-step and the second-step estimation across these two estimation methods. Our results contribute to the existing literature in view of using a marginal effective tax rate. For the various estimation results, we confirm the significant negative effect on investment, and for more concretely if the average or the marginal effective tax rate increases by 1%p., then the ratio of investment to total asset decreases by 1.3%p. for the average effective tax rate and 2.7%p. for the marginal effective tax rate. Also, we find the negative effect on employment although empirical results have more or less difference for statistical significance. For comparison between Large and S&M enterprise, the effects of corporate tax burden on investment are presented for both, however the effect on employment is significant for the Large firms but is not significant for the S&M enterprise.