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Employment Effects of Payroll Taxes - An Empirical Test for Germany

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  • Bauer, Thomas K.

    ()
    (RWI)

  • Riphahn, Regina T.

    ()
    (University of Erlangen-Nuremberg)

Abstract

This study tests to what degree the incidence of payroll taxes in Germany is on employment and whether in consequence payroll taxes, in particular social insurance contributions, are the culprit behind the growing unemployment problem. Using industry level data for 18 years (1977-1994) we estimate a system of five interdependent, dynamic factor demand equations. Various simulations indicate that the employment effects of payroll taxes are minimal

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 11.

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Length: 30 pages
Date of creation: Jun 1998
Date of revision:
Publication status: published in: Applied Economics, 2002, 34 (7), 865-876
Handle: RePEc:iza:izadps:dp11

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Keywords: unemployment; payroll tax; dynamic labor demand; social insurance;

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References

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  1. Rossana, Robert J, 1990. "Interrelated Demands for Buffer Stocks and Productive Inputs: Estimates for Two-Digit Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 19-29, February.
  2. Flaig, Gebhard & Steiner, Viktor, 1989. "Stability and Dynamic Properties of Labour Demand in West German Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 395-412, November.
  3. Keane, Michael P & Prasad, Eswar S, 1996. "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 389-400, August.
  4. Stephen Nickell & D. Nicolitsas, 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
  5. Timo Tyrväinen, 1995. "Real Wage Resistance and Unemployment: Multivariate Analysis of Cointegrating Relations in 10 OECD Countries," OECD Jobs Study Working Papers 10, OECD Publishing.
  6. Steiner, Viktor, 1996. "Employment and Wage Effects of Social Security Financing: An Empirical Analysis of the West German Experience and some Policy Simulations," ZEW Discussion Papers 96-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Jonathan Gruber & Alan B. Krueger, 1990. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Working Papers 3557, National Bureau of Economic Research, Inc.
  8. 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.
  9. Konig, Heinz & Pohlmeier, Winfried, 1988. "Employment, Labour Utilization and Procyclical Labour Productivity," Kyklos, Wiley Blackwell, vol. 41(4), pages 551-72.
  10. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  11. Felix Fitzroy & Michael Funke, 1993. "Real Wages, Investment and Employment - New Evidence From West German Sectoral Data," CRIEFF Discussion Papers 9305, Centre for Research into Industry, Enterprise, Finance and the Firm.
  12. Hart, Robert A. & McGregor, Peter G., 1988. "The returns to labour services in West German manufacturing industry," European Economic Review, Elsevier, vol. 32(4), pages 947-963, April.
  13. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
  14. Kraft, Kornelius, 1997. "Hiring and Dismissal Costs in Theory and Practice: A Comparison of Institutional Constraints and Employment Adjustment Patterns in Six OECD Countries," Kyklos, Wiley Blackwell, vol. 50(3), pages 341-68.
  15. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
  16. Schmidt, Christoph M, 1994. "Relative Wage Effects of German Unions," CEPR Discussion Papers 918, C.E.P.R. Discussion Papers.
  17. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-71, Part I Se.
  18. Machin, Stephen & Manning, Alan, 1997. "Minimum wages and economic outcomes in Europe," European Economic Review, Elsevier, vol. 41(3-5), pages 733-742, April.
  19. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  20. Entorf, Horst & Konig, Heinz & Pohlmeier, Winfried, 1992. " Labor Utilization and Nonwage Labor Costs in a Disequilibrium Macro Framework," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(1), pages 71-83.
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Citations

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Cited by:
  1. Skedinger, Per, 2014. "Effects of Payroll Tax Cuts for Young Workers," Working Paper Series 1031, Research Institute of Industrial Economics.
  2. Kemmerling, Achim, 2002. "The employment effects of different regimes of welfare state taxation: An empirical analysis of core OECD countries," MPIfG Discussion Paper 02/8, Max Planck Institute for the Study of Societies.
  3. Thalmaier, Anja, 1999. "Bestimmungsgründe von Fehlzeiten: Welche Rolle spielt die Arbeitslosigkeit?," IZA Discussion Papers 62, Institute for the Study of Labor (IZA).
  4. Caroline Dieckhoener & Andreas Peichl, 2009. "Financing Social Security: Simulating Different Welfare State Systems for Germany," SOEPpapers on Multidisciplinary Panel Data Research 180, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. repec:ese:emodwp:em3-09 is not listed on IDEAS
  6. Daniela Sonedda, 2006. "A structural VAR approach on labour taxation policies," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 95-114.
  7. Adam Wagstaff, 2010. "Social health insurance reexamined," Health Economics, John Wiley & Sons, Ltd., vol. 19(5), pages 503-517.
  8. repec:ese:emodwp:em2-02 is not listed on IDEAS
  9. Herwig Immervoll, 2003. "The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States," Public Economics 0302005, EconWPA.

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