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The Finnish payroll tax cut experiment revisited, or where did the money go?

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  • Ossi Korkeamäki

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Abstract

In this paper I evaluate the effects of a regional experiment that reduced payroll-taxes by 3–6 percentage points of the firm’s wage sum in Northern and Eastern Finland. I estimate the effect of the payroll-tax reduction on firms’ employment, wage sum and profits, and on workers hourly pay and monthly hours worked, by comparing employment and wage changes before and after the start of the experiment to a control region. According to my results, the reduction in the payroll-taxes did not lead to any clear cut aggregate effects in the target region.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p898.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa11p898

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  1. Mirko Draca & Stephen Machin & John Van Reenen, 2008. "Minimum Wages and Firm Profitability," NBER Working Papers 13996, National Bureau of Economic Research, Inc.
  2. Guido M. Imbens & Jeffrey M. Wooldridge, 2008. "Recent Developments in the Econometrics of Program Evaluation," NBER Working Papers 14251, National Bureau of Economic Research, Inc.
  3. Frode Johansen & Tor Jacob Klette, 1997. "Wage and Employment Effects of Payroll Taxes and Investment Subsidies," Discussion Papers 194, Research Department of Statistics Norway.
  4. Daniel Aaronson & Eric French, 2007. "Product Market Evidence on the Employment Effects of the Minimum Wage," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 167-200.
  5. Goerke, Laszlo, 1996. "Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(5), pages 549-65, November.
  6. Hansen, Christian B., 2007. "Asymptotic properties of a robust variance matrix estimator for panel data when T is large," Journal of Econometrics, Elsevier, vol. 141(2), pages 597-620, December.
  7. Hansen, Christian B., 2007. "Generalized least squares inference in panel and multilevel models with serial correlation and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 670-694, October.
  8. Ossi Korkeamäki & Roope Uusitalo, 2009. "Employment and wage effects of a payroll-tax cut—evidence from a regional experiment," International Tax and Public Finance, Springer, vol. 16(6), pages 753-772, December.
  9. Daniel Aaronson, 2001. "Price Pass-Through And The Minimum Wage," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 158-169, February.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Are payroll tax cuts efficient?
    by Economic Logician in Economic Logic on 2011-11-29 15:28:00

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