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Payroll Tax, Employment and Labor Market Concentration

Author

Listed:
  • Baumgartner, Erick

    (Bocconi University)

  • Corbi, Raphael

    (University of Sao Paulo)

  • Narita, Renata

    (PUC-Rio)

Abstract

How much employment can be generated by decreasing payroll taxes? We examine this question by exploring the staggered rollout of a large payroll tax reform in Brazil. Using administrative matched employer-employee data, we find an increase of 5 percent on employment due to both firm growth and firm entry, no impact on wages and a significant increase in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent with predictions from an oligopsony model.

Suggested Citation

  • Baumgartner, Erick & Corbi, Raphael & Narita, Renata, 2026. "Payroll Tax, Employment and Labor Market Concentration," IZA Discussion Papers 18838, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18838
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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