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Wage Effects of Means-Tested Transfers: Incidence Implications of Using Firms as Intermediaries

Author

Listed:
  • Santiago Garriga
  • Darío Tortarolo

Abstract

We show that how countries disburse tax credits matters for economic incidence. We exploit a reform in Argentina that shifted the disbursement of child benefits from employers to the government in a staggered fashion. Using administrative data and an event-study approach, we find that employers receive 5 to 13 percent of the transfers through reduced wages when they mediate the payments. This wage effect is more pronounced for low-income workers, particularly new hires, and in smaller and less unionized firms. We argue that workers likely misperceived firm-disbursed transfers as part of their work compensation, leading to incidence-sharing effects. Our findings suggest that relying on firms as intermediaries in the tax-benefit system can have unexpected labor market consequences.

Suggested Citation

  • Santiago Garriga & Darío Tortarolo, "undated". "Wage Effects of Means-Tested Transfers: Incidence Implications of Using Firms as Intermediaries," CEFIP, Working Papers 052, CEFIP, Universidad Nacional de La Plata.
    • Handle: RePEc:akh:wcefip:052
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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