Employment Effects of a Payroll-Tax Cut: Evidence from a Regional Tax Exemption Experiment
AbstractIn this paper we evaluate the effects of a regional experiment that reduced payroll taxes by 3-6 percentage points in Northern Finland for three years. We match each firm in the target region with a similar firm in the control region and estimate the effect of the payroll-tax reduction by comparing employment and wage changes within the matched pairs before and after the start of the experiment. According to our results the reduction in payroll taxes led to somewhat faster wage growth in the target region. The increase in wages offset roughly half of the impact of the payroll-tax cut on the labour costs. The remaining labour cost reduction had no significant effects on employment.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 407.
Date of creation: 21 Nov 2006
Date of revision:
Other versions of this item:
- Korkeamäki, Ossi & Uusitalo, Roope, 2006. "Employment effects of a payroll-tax cut - evidence from a regional tax exemption experiment," Working Paper Series 2006:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
- J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-01 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansen, F. & Klette, T.J., 1998.
"Wage and Employment Effects of Payroll Taxes and Investment Subsidies,"
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- Gruber, Jonathan, 1997.
"The Incidence of Payroll Taxation: Evidence from Chile,"
Journal of Labor Economics,
University of Chicago Press, vol. 15(3), pages S72-101, July.
- Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- "A tax on jobs" - experimental evidence
by chris dillow in Stumbling and Mumbling on 2010-04-08 13:08:10
- Viren, Matti, 2011. "Does housing allowance feed through into rental prices?," Research Discussion Papers 11/2011, Bank of Finland.
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