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Estimating employment responses to South Africa's Employment Tax Incentive

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  • Joshua Budlender
  • Amina Ebrahim

Abstract

We present new evidence on the effects of South Africa's Employment Tax Incentive (ETI), a hiring and employment wage subsidy aimed at reducing youth unemployment. We show that attempts to estimate firm-level treatment effects via conditional difference-in-differences are likely to fail when comparing ETI to matched non-ETI firms.

Suggested Citation

  • Joshua Budlender & Amina Ebrahim, 2021. "Estimating employment responses to South Africa's Employment Tax Incentive," WIDER Working Paper Series wp-2021-118, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2021-118
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    File URL: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2021-118-estimating-employment-responses-South-Africa-Employment-Tax-Incentive.pdf
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    References listed on IDEAS

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    1. Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, American Economic Association, vol. 109(5), pages 1717-1763, May.
    2. Vimal Ranchhod & Arden Finn, 2016. "Estimating the Short Run Effects of South Africa's Employment Tax Incentive on Youth Employment Probabilities using A Difference-in-Differences Approach," South African Journal of Economics, Economic Society of South Africa, vol. 84(2), pages 199-216, June.
    3. Duncan Pieterse & Elizabeth Gavin & C. Friedrich Kreuser, 2018. "Introduction to the South African Revenue Service and National Treasury Firm‐Level Panel," South African Journal of Economics, Economic Society of South Africa, vol. 86(S1), pages 6-39, January.
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    5. Daniel Bischof, 2017. "New graphic schemes for Stata: plotplain and plottig," Stata Journal, StataCorp LP, vol. 17(3), pages 748-759, September.
    6. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    7. Andrew Kerr, 2020. "Earnings in the South African Revenue Service IRP5 data," WIDER Working Paper Series wp-2020-62, World Institute for Development Economic Research (UNU-WIDER).
    8. Justin Wolfers, 2006. "Did Unilateral Divorce Laws Raise Divorce Rates? A Reconciliation and New Results," American Economic Review, American Economic Association, vol. 96(5), pages 1802-1820, December.
    9. King, Gary & Nielsen, Richard, 2019. "Why Propensity Scores Should Not Be Used for Matching," Political Analysis, Cambridge University Press, vol. 27(4), pages 435-454, October.
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    Cited by:

    1. Amina Ebrahim & Jukka Pirttilä, 2022. "A policy for the jobless youth in South Africa: Individual impacts of the Employment Tax Incentive," WIDER Working Paper Series wp-2022-124, World Institute for Development Economic Research (UNU-WIDER).
    2. Timothy Köhler & Robert Hill & Haroon Bhorat, 2022. "The effect of wage subsidies on job retention: Evidence from South Africa during the COVID-19 pandemic," WIDER Working Paper Series wp-2022-114, World Institute for Development Economic Research (UNU-WIDER).

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    Keywords

    Difference-in-differences; Employment; event study; South Africa; Wage subsidy;
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