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Who Bears the Burden of Social Security Contributions in Germany? Evidence from 35 Years of Administrative Data

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  • Kai-Uwe Müller

    (DIW Berlin)

  • Michael Neumann

    (DIW Berlin)

Abstract

This paper provides evidence on the question of who bears the burden of social security contributions (SSC) in Germany over a long-term horizon. Following Alvaredo et al. (De Econ, 2017) we exploit kinks in the budget set generated by a drop in the marginal SSC rate at earnings caps for health and long-term care insurance. These concave kinks lead to discontinuities in the distributions of gross earnings, net earnings, or labor costs which—in the absence of labor supply responses—are informative about economic incidence. Administrative data for West Germany from 1975 to 2010 facilitate a comprehensive incidence analysis. Finding no evidence for labor supply responses and no significant discontinuities in gross earnings distributions, we conclude that neither employers nor employees shift a substantial part of their SSC burden. These results are consistent over the whole time period and hold for several robustness checks corroborating previous findings for Germany. A small trend towards a slight increase in the SSC burden for employees is not statistically significant.

Suggested Citation

  • Kai-Uwe Müller & Michael Neumann, 2017. "Who Bears the Burden of Social Security Contributions in Germany? Evidence from 35 Years of Administrative Data," De Economist, Springer, vol. 165(2), pages 165-179, June.
    • Handle: RePEc:kap:decono:v:165:y:2017:i:2:d:10.1007_s10645-017-9298-3
    DOI: 10.1007/s10645-017-9298-3
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    6. Müller, Kai-Uwe & Neumann, Michael, 2015. "How reliable are incidence estimates based on cross-sectional distributions? Evidence from simulations and linked employer-employee data," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112920, Verein für Socialpolitik / German Economic Association.
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    Cited by:

    1. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-2226, December.
    2. Facundo Alvaredo & Thomas Breda & Barra Roantree & Emmanuel Saez, 2017. "Contribution Ceilings and the Incidence of Payroll Taxes," De Economist, Springer, vol. 165(2), pages 129-140, June.
    3. Kim, Jinyoung & Kim, Seonghoon & Koh, Kanghyock, 2022. "Labor market institutions and the incidence of payroll taxation," Journal of Public Economics, Elsevier, vol. 209(C).
    4. Antoine Bozio & Thomas Breda & Julien Grenet, 2017. "Incidence and Behavioural Response to Social Security Contributions: An Analysis of Kink Points in France," De Economist, Springer, vol. 165(2), pages 141-163, June.
    5. KODAMA Naomi & YOKOYAMA Izumi, 2017. "Labor Market Impact of Labor Cost Increase without Productivity Gain: A natural experiment from the 2003 social insurance premium reform in Japan," Discussion papers 17093, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Incidence; Social security contributions; Discontinuities;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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