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The Incidence of Pension Contributions: A Panel Based Analysis of the Impact of Pension Contributions on Labor Cost, Wages and Labor Supply

Author

Listed:
  • Nicole Bosch

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Casper Ewijk

    (University of Amsterdam
    Netspar)

  • Maja Micevska Scharf

    (CPB Netherlands Bureau for Economic Policy Analysis
    University of Amsterdam)

  • Sander Muns

    (Netspar
    Tilburg University)

Abstract

One of the key elements in the planned pension reform in the Netherlands is to abolish the implicit subsidy from younger to older workers inherent in pension schemes with age independent contribution and accrual rates. This paper investigates the impact of changes in contribution rates on wages, labor costs and labor supply using a rich administrative data set covering individual employees in the Netherlands for the period 2006–2012. With a panel-based approach and data on both marginal and average contribution rates we aim to provide insight into the mechanisms underlying the incidence and labor supply (in hours) effects of pension contributions. For a two-year change in pension contributions we find that 70% of this change is passed on to the labor costs of employers, while 30% is passed on to the net wage of the employee. No significant effects are found for labor supply. At least in the short and medium run, our results seem at variance with the standard demand-and-supply model for the labor market, but are consistent with a bargaining model.

Suggested Citation

  • Nicole Bosch & Casper Ewijk & Maja Micevska Scharf & Sander Muns, 2022. "The Incidence of Pension Contributions: A Panel Based Analysis of the Impact of Pension Contributions on Labor Cost, Wages and Labor Supply," De Economist, Springer, vol. 170(1), pages 107-132, February.
    • Handle: RePEc:kap:decono:v:170:y:2022:i:1:d:10.1007_s10645-022-09401-z
    DOI: 10.1007/s10645-022-09401-z
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    More about this item

    Keywords

    Incidence; Pension contributions; Labor supply;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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