Wage and Employment Effects of Payroll Taxes and Investment Subsidies
AbstractUsing a panel of manufacturing plants we study how payroll taxes and investment subsidies affect wages and demand for labor and capital. We exploit the regional subsidy schemes for labor and capital in Norway. Our empirical analysis finds that a large part of changes in payroll taxes is shifted over to wages. This result suggests that changes in payroll taxes have a limited direct effect on employment. Our study of investment subsidies finds evidence of substitution between labor and capital, with an elasticity of substitution of about 0.4 at the plant level. This indicates that increased taxation of capital will have a positive substitution effect on the demand for labor
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 194.
Date of creation: May 1997
Date of revision:
Wages; Labor Demand; Business Taxation;
Other versions of this item:
- Johansen, F. & Klette, T.J., 1998. "Wage and Employment Effects of Payroll Taxes and Investment Subsidies," Memorandum 27/1998, Oslo University, Department of Economics.
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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- Korkeamäki, Ossi & Uusitalo, Roope, 2006.
"Employment effects of a payroll-tax cut - evidence from a regional tax exemption experiment,"
Working Paper Series
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- 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).
- Ossi KorkeamÃ¤ki, 2011. "The Finnish payroll tax cut experiment revisited, or where did the money go?," ERSA conference papers ersa11p898, European Regional Science Association.
- Bennmarker, Helge & Mellander, Erik & Öckert, Björn, 2008.
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2008:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- Bennmarker, Helge & Mellander, Erik & Öckert, Björn, 2009. "Do regional payroll tax reductions boost employment?," Labour Economics, Elsevier, vol. 16(5), pages 480-489, October.
- Ossi Korkeamäki, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, Government Institute for Economic Research Finland (VATT).
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