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Effects of Payroll Tax Cuts for Young Workers

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Abstract

In response to high and enduring youth unemployment, large payroll tax cuts for young workers were implemented in two Swedish reforms in 2007 and 2009. This paper analyses the effects of the reforms on worker outcomes and firm performance in the retail industry, an important employer of young workers. In general, the estimated effects on job accessions, separations, hours and wages, are small. For workers close to the minimum wage the estimates suggest larger, but still modest, effects on the probability of job accession. There is also some evidence on increasing profits in a subsample of firms that employed relatively many young workers before the first reform, with estimated effects commensurate with small behavioural effects of the payroll tax cuts. The conclusion is that reducing payroll taxes is a costly means of improving employment prospects for the young.

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  • Skedinger, Per, 2014. "Effects of Payroll Tax Cuts for Young Workers," Working Paper Series 1031, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1031
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Egebark, Johan & Kaunitz, Niklas, 2013. "Do payroll tax cuts raise youth employment?," Working Paper Series 2013:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    3. repec:eee:labeco:v:55:y:2018:i:c:p:163-177 is not listed on IDEAS
    4. repec:eee:labeco:v:49:y:2017:i:c:p:55-73 is not listed on IDEAS
    5. Pierre Cahuc & Stéphane Carcillo & Thomas Le Barbanchon, 2014. "Do Hiring Credits Work in Recessions?: Evidence from France," Sciences Po publications 8330, Sciences Po.
    6. Egebark, Johan & Kaunitz, Niklas, 2014. "Payroll Taxes and Youth Labor Demand," Working Paper Series 1001, Research Institute of Industrial Economics, revised 07 Jun 2017.
    7. Neumann, M., 2017. "Earnings responses to social security contributions," Labour Economics, Elsevier, vol. 49(C), pages 55-73.

    More about this item

    Keywords

    Tax subsidy; Labour costs; Minimum wages; Retail industry;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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