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Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?

Author

Listed:
  • Bozio, Antoine

    (Paris School of Economics)

  • Breda, Thomas

    (Paris School of Economics)

  • Grenet, Julien

    (Paris School of Economics)

Abstract

We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.

Suggested Citation

  • Bozio, Antoine & Breda, Thomas & Grenet, Julien, 2019. "Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?," IZA Discussion Papers 12502, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12502
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    References listed on IDEAS

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    1. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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    Cited by:

    1. Andrea Albanese & Bart Cockx & Muriel Dejemeppe, 2022. "Long-Term Effects of Hiring Subsidies for Unemployed Youths—Beware of Spillovers," CESifo Working Paper Series 9972, CESifo.
    2. Kim, Jinyoung & Kim, Seonghoon & Koh, Kanghyock, 2022. "Labor market institutions and the incidence of payroll taxation," Journal of Public Economics, Elsevier, vol. 209(C).
    3. Kentaro Asai, 2022. "Working Hour Reform, Labor Demand and Productivity," PSE Working Papers halshs-03728157, HAL.
    4. Benzarti, Youssef & Harju, Jarkko, 2021. "Can payroll tax cuts help firms during recessions?," Journal of Public Economics, Elsevier, vol. 200(C).
    5. Cockx, Bart & Desiere, Sam, 2024. "Labour costs and the decision to hire the first employee," European Economic Review, Elsevier, vol. 170(C).
    6. Youssef Benzarti & Jarkko Harju, 2021. "Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production," Journal of the European Economic Association, European Economic Association, vol. 19(5), pages 2737-2764.
    7. Bozio, Antoine & Breda, Thomas & Guillot, Malka, 2023. "Using payroll taxes as a redistribution tool," Journal of Public Economics, Elsevier, vol. 226(C).
    8. Kentaro Asai, 2022. "Working Hour Reform, Labor Demand and Productivity," Working Papers halshs-03728157, HAL.
    9. French, E. & Lindner, A. & O'Dea, C. & Zawisza T., 2022. "Labor Supply and the Pension Contribution-Benefit Link," Cambridge Working Papers in Economics 2248, Faculty of Economics, University of Cambridge.
    10. Malka Guillot & Antoine Bozio & Thomas Breda, 2020. "The Contribution of Payroll Taxation to Wage Inequality in France," Working Papers halshs-01294599, HAL.
    11. Li, Rui & Zhu, Zhikai & Wang, Xiaoyan, 2023. "Pension insurance contributions and ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).
    12. Antoine Bozio & Simon Rabaté & Maxime Tô & Julie Tréguier, 2023. "Financial Incentives and Labor Force Participation of Older Workers: Evidence from France," NBER Chapters, in: Social Security Programs and Retirement around the World: The Effects of Reforms on Retirement Behavior, pages 125-163, National Bureau of Economic Research, Inc.
    13. Enrico Rubolino, 2022. "Taxing the Gender Gap: Labor Market Effects of a Payroll Tax Cut for Women in Italy," CESifo Working Paper Series 9671, CESifo.
    14. Julien Martin & Florian Mayneris, 2022. "Revue de littérature sur l’incidence fiscale des taxes sur les entreprises," CIRANO Project Reports 2022rp-06, CIRANO.
    15. Iris Kesternich & Marjolein Van Damme & Han Ye, 2024. "Job Amenities and the Gender Pension Gap," CRC TR 224 Discussion Paper Series crctr224_2024_600v2, University of Bonn and University of Mannheim, Germany, revised Apr 2025.
    16. Enrico Rubolino, 2022. "Taxing the Gender Gap: Labor Market Effects of a Payroll Tax Cut for Women in Italy," Cahiers de Recherches Economiques du Département d'économie 22.01, Université de Lausanne, Faculté des HEC, Département d’économie.
    17. A. Moutaabbid, 2024. "Les determinants de la dynamique des salaires en France : approches macro et sectorielles par la courbe de Phillips," Documents de Travail de l'Insee - INSEE Working Papers 2024-20, Institut National de la Statistique et des Etudes Economiques.
    18. Nathan Lachapelle & Francesco Pascucci, 2021. "Wage Rigidities in a Quantitative Spatial Economy: Commuting and Local Unemployment," LIDAM Discussion Papers IRES 2021027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    19. Tian, Liu, 2025. "Firms’ labor market and evasion responses to the minimum social security contributions," Journal of Asian Economics, Elsevier, vol. 100(C).

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    Keywords

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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