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Visibility of social security contributions and employment

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Author Info

  • Iñigo Iturbe-Ormaetxe Kortajarene

    ()
    (Universidad de Alicante)

Abstract

Social security contributions in most countries are split between employers and employees. According to standard incidence analysis, social security contributions affect employment negatively, but it is irrelevant how they are divided between employers and employees. This paper considers the possibility that: (i) workers perceive a linkage between current contributions and future benefits and, (ii) they discount employers contributions more heavily, as they are less “visible”. Under these assumptions, I find that employer contributions have a stronger (negative) effect on employment than employee contributions. Furthermore, a change in how contributions are divided that reduces the share of employers is beneficial for employment. Finally, making employers contributions more visible to workers also has a positive effect on employment.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-16.pdf
File Function: Fisrt version / Primera version, 2011
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-16.

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Length: 30 pages
Date of creation: Jul 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2011-16

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Related research

Keywords: Payroll tax; social security; tax incidence; tax visibility;

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References

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  1. Giovanni Mastrobuoni, 2010. "The Role of Information for Retirement Behavior: Evidence based on the Stepwise Introduction of the Social Security Statement," Carlo Alberto Notebooks 139, Collegio Carlo Alberto, revised 2010.
  2. Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
  3. Erkki Koskela & Ronnie Schöb, 1999. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?," Discussion Papers 203, Government Institute for Economic Research Finland (VATT).
  4. Casey B. Mulligan & Ricard Gil & Xavier Sala-i-Martin, 2002. "Social Security and democracy," Discussion Papers 0102-63, Columbia University, Department of Economics.
  5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  6. Raj Chetty, 2009. "The Simple Economics of Salience and Taxation," NBER Working Papers 15246, National Bureau of Economic Research, Inc.
  7. Feldstein, Martin & Samwick, Andrew A., 1992. "Social Security Rules and Marginal Tax Rates," National Tax Journal, National Tax Association, vol. 45(1), pages 1-22, March Cit.
  8. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," NBER Working Papers 7117, National Bureau of Economic Research, Inc.
  9. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
  10. Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
  11. Jacob Goldin & Tatiana Homonoff, 2013. "Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 302-36, February.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Make social security contributions more visible
    by Economic Logician in Economic Logic on 2011-08-31 14:02:00

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