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Are Senior Workers Overpriced? Evidence from an Age-Differentiated Payroll Tax in Norway

Author

Listed:
  • Holden, Steinar

    (Department of Economics, University of Oslo)

  • Markussen, Simen

    (Ragnar Frisch Centre for Economic Research)

  • Røed, Knut

    (Ragnar Frisch Centre for Economic Research)

Abstract

Differentiation of the employer-born payroll tax may be a tool to raise employment for groups whose wage entitlements are set above market clearing levels – e.g., through collective bargaining, minimum wage legislation or implicit contracts. We provide an empirical evaluation of a reform in Norway in 2002 whereby the payroll tax for mature (62+) workers was reduced by 4 percentage points. Our findings indicate that the reform led to a 2-3% increase in total hours worked by persons aged 62-64. Approximately 25% of the tax cut was passed on to the workers in the form of higher hourly wages.

Suggested Citation

  • Holden, Steinar & Markussen, Simen & Røed, Knut, 2026. "Are Senior Workers Overpriced? Evidence from an Age-Differentiated Payroll Tax in Norway," IZA Discussion Papers 18727, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18727
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    References listed on IDEAS

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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