Do regional payroll tax reductions boost employment?
Using a Difference-in-Differences approach we evaluate the effects of a 10 percentage points reduction in the payroll tax introduced in 2002 for firms in the northern part of Sweden. We find no employment effects for existing firms and can rule out that a 1 percentage point payroll tax reduction would increase employment with more than 0.2 percent. We do, however, find that tax reductions have significantly positive effects on the average wage bill per employee. These are likely to be driven by higher average wages, but might also be due to more hours worked. As a sensitivity check we investigate if reduced payroll taxes affect the likelihood of firm entry and exit, and find some support for a net firm inflow. Our attempts to assess concomitant effects on employment indicate that payroll tax reductions might yield increases in employment through the start-up of new firms.
|Date of creation:||05 Sep 2008|
|Date of revision:|
|Contact details of provider:|| Postal: IFAU, P O Box 513, SE-751 20 Uppsala, Sweden|
Phone: (+46) 18 - 471 70 70
Fax: (+46) 18 - 471 70 71
Web page: http://www.ifau.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Don Fullerton & Gilbert E. Metcalf, 2001.
Discussion Papers Series, Department of Economics, Tufts University
0106, Department of Economics, Tufts University.
- Don Fullerton & Gilbert E. Metcalf, 2002. "Tax Incidence," NBER Working Papers 8829, National Bureau of Economic Research, Inc.
- Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0607, Department of Economics, Tufts University.
- Frode Johansen & Tor Jacob Klette, 1997.
"Wage and Employment Effects of Payroll Taxes and Investment Subsidies,"
194, Statistics Norway, Research Department.
- Johansen, F. & Klette, T.J., 1998. "Wage and Employment Effects of Payroll Taxes and Investment Subsidies," Memorandum 27/1998, Oslo University, Department of Economics.
- Steve J. Davis & John Haltiwanger, 1991.
"Gross job creation, gross job destruction and employment reallocation,"
Working Paper Series, Macroeconomic Issues
91-5, Federal Reserve Bank of Chicago.
- Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
- Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
- Gruber, Jonathan, 1997.
"The Incidence of Payroll Taxation: Evidence from Chile,"
Journal of Labor Economics,
University of Chicago Press, vol. 15(3), pages S72-101, July.
- Jonathan Gruber, 1995. "The Incidence of Payroll Taxation: Evidence from Chile," NBER Working Papers 5053, National Bureau of Economic Research, Inc.
- Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
- Holmlund, Bertil, 1983.
" Payroll Taxes and Wage Inflation: The Swedish Experience,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 85(1), pages 1-15.
- Holmlund, Bertil, 1983. "Payroll Taxes and Wage Inflation: The Swedish Experiences," Working Paper Series 68, Research Institute of Industrial Economics.
- Bingley, Paul & Lanot, Gauthier, 2002. "The incidence of income tax on wages and labour supply," Journal of Public Economics, Elsevier, vol. 83(2), pages 173-194, February.
- Murphy, Kevin J., 2007. "The impact of unemployment insurance taxes on wages," Labour Economics, Elsevier, vol. 14(3), pages 457-484, June.
- Bohm, Peter & Lind, Hans, 1993. "Policy evaluation quality : A quasi-experimental study of regional employment subsidies in Sweden," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 51-65, March.
- Ossi Korkeamäki & Roope Uusitalo, 2004. "Employment effects of a payroll tax cut – Evidence from a regional tax subsidy experiment," ERSA conference papers ersa04p350, European Regional Science Association.
- Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
When requesting a correction, please mention this item's handle: RePEc:hhs:ifauwp:2008_019. 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: (Monica Fällgren)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.