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 for three years in Northern Finland. 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 the 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 IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2006:10.
Length: 29 pages
Date of creation: 10 Oct 2006
Date of revision:
Payroll-tax; Labour demand; Tax incidence; Propensity score matching;
Other versions of this item:
- Ossi Korkeamäki & Roope Uusitalo, 2006. "Employment Effects of a Payroll-Tax Cut: Evidence from a Regional Tax Exemption Experiment," Discussion Papers 407, Government Institute for Economic Research Finland (VATT).
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
This paper has been announced in the following NEP Reports:
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.:
- Frode Johansen & Tor Jacob Klette, 1997.
"Wage and Employment Effects of Payroll Taxes and Investment Subsidies,"
194, Research Department of Statistics Norway.
- Johansen, F. & Klette, T.J., 1998. "Wage and Employment Effects of Payroll Taxes and Investment Subsidies," Memorandum 27/1998, Oslo University, Department of Economics.
- 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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