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Visibility of social security contributions and employment

  • Iñigo Iturbe-Ormaetxe Kortajarene


    (Universidad de Alicante)

Social security contributions in most countries are split between employers and employees. According to standard incidence analysis, social security contributions affect employment negatively, but it is irrelevant how they are divided between employers and employees. This paper considers the possibility that: (i) workers perceive a linkage between current contributions and future benefits and, (ii) they discount employers contributions more heavily, as they are less “visible”. Under these assumptions, I find that employer contributions have a stronger (negative) effect on employment than employee contributions. Furthermore, a change in how contributions are divided that reduces the share of employers is beneficial for employment. Finally, making employers contributions more visible to workers also has a positive effect on employment.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-16.

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Length: 30 pages
Date of creation: Jul 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2011-16
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  1. Casey B Mulligan, 1999. "Gerontocracy, Retirement, and Social Security," University of Chicago - George G. Stigler Center for Study of Economy and State 154, Chicago - Center for Study of Economy and State.
  2. 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.
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  7. Giovanni Mastrobuoni, 2009. "The Role of Information for Retirement Behavior: Evidence Based on the Stepwise Introduction of the Social Security Statement," Working Papers, Center for Retirement Research at Boston College wp2009-23, Center for Retirement Research, revised Oct 2009.
  8. Jacob Goldin & Tatiana Homonoff, 2010. "Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity," Working Papers 1278, Princeton University, Department of Economics, Industrial Relations Section..
  9. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
  10. Xavier Sala-i-Martin, 2002. "Social security and democracy," Economics Working Papers 621, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  12. Raj Chetty, 2009. "The Simple Economics of Salience and Taxation," NBER Working Papers 15246, National Bureau of Economic Research, Inc.
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