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The Contribution of Payroll Taxation to Wage Inequality in France

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  • Bozio, Antoine

    (Paris School of Economics)

  • Breda, Thomas

    (Paris School of Economics)

  • Guillot, Malka

    (ETH Zurich)

Abstract

Over the 1967-2015 period, net wage inequality has decreased in France by 25%, in contrast to the significant increase experienced by most developed countries. Less well known is the fact that labor cost inequality has actually increased by 8% over the same period. We show that, (a) standard demand-side explanations for the rise in inequality apply in France when tested using measures of labor cost (as they should be); (b) reforms to payroll taxation, jointly with increases in the minimum wage, can explain a large part of the decrease in net wage inequality, in the context of increasing market inequality.

Suggested Citation

  • Bozio, Antoine & Breda, Thomas & Guillot, Malka, 2020. "The Contribution of Payroll Taxation to Wage Inequality in France," IZA Discussion Papers 13317, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13317
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    Cited by:

    1. Magnac, Thierry & Roux, Sébastien, 2021. "Heterogeneity and wage inequalities over the life cycle," European Economic Review, Elsevier, vol. 134(C).
    2. Piketty, Thomas & Bozio, Antoine & Garbinti, Bertrand & Goupille-Lebret, Jonathan & Guillot, Malka, 2020. "Predistribution vs. Redistribution: Evidence from France and the U.S," CEPR Discussion Papers 15415, C.E.P.R. Discussion Papers.
    3. Bozio, Antoine & Breda, Thomas & Guillot, Malka, 2020. "The Contribution of Payroll Taxation to Wage Inequality in France," IZA Discussion Papers 13317, Institute of Labor Economics (IZA).
    4. Thierry Magnac, 2024. "Human Capital and Search Models: A Happy Match," Revue économique, Presses de Sciences-Po, vol. 75(1), pages 11-29.
    5. Luca Bittarello & Francis Kramarz & Alexis Maitre, 2024. "The Task Content of Occupations," Revue économique, Presses de Sciences-Po, vol. 75(1), pages 31-53.
    6. d'Albis, Hippolyte & Badji, Ikpidi, 2022. "Inequality within generation: Evidence from France," Research in Economics, Elsevier, vol. 76(1), pages 69-83.
    7. Antoine Bozio & Bertrand Garbinti & Jonathan Goupille-Lebret & Malka Guillot & Thomas Piketty, 2024. "Predistribution versus Redistribution: Evidence from France and the United States," American Economic Journal: Applied Economics, American Economic Association, vol. 16(2), pages 31-65, April.
    8. Elvire Guillaud & Matthew Olckers & Michaël Zemmour, 2020. "Four Levers of Redistribution: The Impact of Tax and Transfer Systems on Inequality Reduction," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 444-466, June.
    9. Bauluz, Luis & Bukowski, Pawel & Fransham, Mark & Lee, Annie Seong & López Forero, Margarita & Novokmet, Filip & Breau, Sébastien & Lee, Neil & Malgouyres, Clément & Schularick, Moritz & Verdugo, Greg, 2023. "Spatial wage inequality in North America and Western Europe: changes between and within local labour markets 1975-2019," LSE Research Online Documents on Economics 121290, London School of Economics and Political Science, LSE Library.
    10. Carla Krolage & Andreas Peichl & Daniel Waldenström, 2018. "Richer or more Numerous or both? The Role of Population and Economic Growth for Top Income Shares," CESifo Working Paper Series 7385, CESifo.
    11. James Harrigan & Ariell Reshef & Farid Toubal, 2016. "The March of the Techies: Technology, Trade, and Job Polarization in France, 1994-2007," NBER Working Papers 22110, National Bureau of Economic Research, Inc.
    12. Sébastien Bock, 2018. "Job Polarization and Unskilled Employment Losses in France," PSE Working Papers halshs-01513037, HAL.
    13. Pora, Pierre & Wilner, Lionel, 2020. "A decomposition of labor earnings growth: Recovering Gaussianity?," Labour Economics, Elsevier, vol. 63(C).
    14. Magnac, Thierry, 2023. "Capital humain et recherche d'emploi: un mariage heureux - Human Capital and Search Models: A Happy Match," TSE Working Papers 23-1489, Toulouse School of Economics (TSE).
    15. Francis Kramarz & Elio Nimier‐David & Thomas Delemotte, 2022. "Inequality and earnings dynamics in France: National policies and local consequences," Quantitative Economics, Econometric Society, vol. 13(4), pages 1527-1591, November.
    16. Pierre Cahuc, 2022. "Inequalities in the French labour market: a mixed picture," SciencePo Working papers Main hal-03882550, HAL.
    17. Ch.-M. CHEVALIER, 2018. "Consumption inequality in France between 1995 and 2011," Documents de Travail de l'Insee - INSEE Working Papers g2018-07, Institut National de la Statistique et des Etudes Economiques.
    18. Pierre Cahuc, 2022. "Inequalities in the French labour market: a mixed picture," Working Papers hal-03882550, HAL.

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    More about this item

    Keywords

    wage inequality; labor cost; payroll tax; Social Security contributions; tax incidence;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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