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Firm Heterogeneity and the Impact of Payroll Taxes

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  • Bíró,Anikó
  • Branyiczki,Réka
  • Lindner,Attila
  • Márk,Lili
  • Prinz,Daniel

Abstract

This paper studies the impact of a large payroll tax cut for older workers in Hungary.Motivated by the predictions of a standard equilibrium job search model, the paper examines the heterogeneous impact ofthe policy. Employment increases most at low-productivity firms offering low-wage jobs, which tend to hire fromunemployment, while the effects are more muted for high-productivity firms offering high-wage jobs. At the sametime, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence ofpayroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobsin the labor market.

Suggested Citation

  • Bíró,Anikó & Branyiczki,Réka & Lindner,Attila & Márk,Lili & Prinz,Daniel, 2022. "Firm Heterogeneity and the Impact of Payroll Taxes," Policy Research Working Paper Series 10265, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10265
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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