IDEAS home Printed from https://ideas.repec.org/p/dls/wpaper/0093.html
   My bibliography  Save this paper

Payroll Taxes, Wages and Employment: Identification through Policy Changes

Author

Listed:
  • Guillermo Cruces

    (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - FCE - UNLP y CONICET)

  • Sebastian Galiani

    (Washington University in Saint Louis - United States.)

  • Susana Kidyba

    (Instituto Nacional de Estadística y Censos (INDEC) - Argentina)

Abstract

This paper investigates the effect of changes in payroll taxes on wages and employment in Argentina. The analysis, based on administrative data, focuses on the impact of a series of major changes in payroll taxes which varied across geographical areas. This setup offers two main advantages over previous studies. First, using longitudinal data, the variation in tax rates across space and time provides a plausible source of identification of their effects on employment and wages. Second, the use of legal tax rates for each area at each point in time provides a remedy for the measurement error bias raised by the use of empirical rates constructed from observed tax and wage bills. Once this bias is accounted for, the results indicate that changes in payroll tax rates are only partially shifted onto wages, and they point to the absence of any significant effect on employment.

Suggested Citation

  • Guillermo Cruces & Sebastian Galiani & Susana Kidyba, 2010. "Payroll Taxes, Wages and Employment: Identification through Policy Changes," CEDLAS, Working Papers 0093, CEDLAS, Universidad Nacional de La Plata.
    • Handle: RePEc:dls:wpaper:0093
    as

    Download full text from publisher

    File URL: http://www.cedlas.econo.unlp.edu.ar/wp/wp-content/uploads/doc_cedlas93.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
    2. Cruces, Guillermo & Galiani, Sebastian & Kidyba, Susana, 2010. "Payroll taxes, wages and employment: Identification through policy changes," Labour Economics, Elsevier, vol. 17(4), pages 743-749, August.
    3. Adriana Kugler & Maurice Kugler, 2003. "The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia," Economics Working Papers 721, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
    5. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
    6. Kugler, Adriana & Kugler, Maurice, 2003. "The labor market effects of payroll taxes in a middle-income country: evidence from Colombia," Discussion Paper Series In Economics And Econometrics 0306, Economics Division, School of Social Sciences, University of Southampton.
    7. Jonathan Gruber & Alan B. Krueger, 1991. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Chapters,in: Tax Policy and the Economy, Volume 5, pages 111-144 National Bureau of Economic Research, Inc.
    8. Holmlund, Bertil, 1983. " Payroll Taxes and Wage Inflation: The Swedish Experience," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(1), pages 1-15.
    9. Anderson, Patricia M. & Meyer, Bruce D., 1997. "The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program," Journal of Public Economics, Elsevier, vol. 65(2), pages 119-145, August.
    10. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
    11. repec:fth:prinin:279 is not listed on IDEAS
    12. Murphy, Kevin J., 2007. "The impact of unemployment insurance taxes on wages," Labour Economics, Elsevier, vol. 14(3), pages 457-484, June.
    13. Sebastian Galiani & Pablo Gerchunoff, 2003. "The Labor Market," Working Papers 56, Universidad de San Andres, Departamento de Economia, revised Feb 2003.
    14. Brittain, John A, 1971. "The Incidence of Social Security Payroll Taxes," American Economic Review, American Economic Association, vol. 61(1), pages 110-125, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard M. Bird & Michael Smart, 2012. "Financing Social Expenditures in Developing Countries: Payroll or Value Added Taxes?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1206, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Arturo Antón, 2014. "The effect of payroll taxes on employment and wages under high labor informality," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-23, December.
    3. Cervini-Plá, María & Ramos, Xavier & Ignacio Silva, José, 2014. "Wage effects of non-wage labour costs," European Economic Review, Elsevier, vol. 72(C), pages 113-137.
    4. Hildegunn Ekroll Stokke, 2015. "Regional payroll tax cuts and individual wages: Heterogeneous effects across education groups," Working Paper Series 16815, Department of Economics, Norwegian University of Science and Technology.
    5. Eduardo Lora & Johanna Fajardo-González, 2016. "Employment and taxes in Latin America: An empirical study of the effects of payroll, corporate income and value-added taxes on labor outcomes," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, vol. 35(Especial ), pages 75-117, January.
    6. Marcelo Bergolo & Guillermo Cruces, 2014. "Work and tax evasion incentive effects of social insurance programs. Evidence from an employment-based benefit extension," CEDLAS, Working Papers 0161, CEDLAS, Universidad Nacional de La Plata.
    7. Sonia A. Agudelo & Hector Sala, 2016. "Wage setting in the Colombian manufacturing industry," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(1), pages 99-134, January.
    8. Santiago Levy & Norbert Schady, 2013. "Latin America's Social Policy Challenge: Education, Social Insurance, Redistribution," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 193-218, Spring.
    9. Bertranou, Fabio. & Casanova, Luis. & Jiménez, Maribel. & Jiménez, Mónica., 2014. "Informality and employment quality in Argentina : country case study on labour market segmentation," ILO Working Papers 994854223402676, International Labour Organization.
    10. Jonas Månsson & A. Quoreshi, 2015. "Evaluating regional cuts in the payroll tax from a firm perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 323-347, March.
    11. Facundo Alvaredo & Guillermo Cruces & Leonardo Gasparini, 2018. "A short episodic history of income distribution in Argentina," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 27(1), pages 1-45, December.
    12. Leonardo Fabio Morales & Carlos Medina, 2017. "Assessing the Effect of Payroll Taxes on Formal Employment: The Case of the 2012 Tax Reform in Colombia," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2017), pages 75-124, November.
    13. Scherer, C.R., 2015. "Payroll tax reduction in Brazil : Effects on employment and wages," ISS Working Papers - General Series 602, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    14. Cruces, Guillermo & Galiani, Sebastian & Kidyba, Susana, 2010. "Payroll taxes, wages and employment: Identification through policy changes," Labour Economics, Elsevier, vol. 17(4), pages 743-749, August.
    15. Skedinger, Per, 2014. "Effects of Payroll Tax Cuts for Young Workers," Working Paper Series 1031, Research Institute of Industrial Economics.
    16. repec:eur:ejmsjr:345 is not listed on IDEAS
    17. Deslauriers, Jonathan & Dostie, Benoit & Gagné, Robert & Paré, Jonathan, 2018. "Estimating the Impacts of Payroll Taxes: Evidence from Canadian Employer-Employee Tax Data," IZA Discussion Papers 11598, Institute for the Study of Labor (IZA).
    18. Bergolo, Marcelo & Cruces, Guillermo, 2014. "Work and tax evasion incentive effects of social insurance programs," Journal of Public Economics, Elsevier, vol. 117(C), pages 211-228.
    19. Shiferaw, Admasu & Bedi, Arjun S. & Söderbom, Mans & Alemu, Getnet, 2017. "Social Insurance Reform and Labor Market Outcomes in Sub-Saharan Africa: Evidence from Ethiopia," IZA Discussion Papers 10903, Institute for the Study of Labor (IZA).
    20. repec:ilo:ilowps:485422 is not listed on IDEAS

    More about this item

    Keywords

    Argentina; payroll taxes; employment; wages;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dls:wpaper:0093. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Pacheco). General contact details of provider: http://edirc.repec.org/data/funlpar.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.