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Payroll Tax, Employment and Labor Market Concentration

Author

Listed:
  • Erick Baumgartner
  • Raphael Corbi, Renata Narita

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 an increase of 59 percent in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent with predictions from an oligopsony model.

Suggested Citation

  • Erick Baumgartner & Raphael Corbi, Renata Narita, 2022. "Payroll Tax, Employment and Labor Market Concentration," Working Papers, Department of Economics 2022_06, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2022wpecon06
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Baumgartner_Corbi_Narita_06WP.pdf
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    Citations

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    Cited by:

    1. Camila Cisneros-Acevedo & Alessandro Ruggieri, 2022. "Firms, policies, informality, and the labour market," Discussion Papers 2022-11, University of Nottingham, GEP.
    2. Felipe Lobel, 2022. "The Unequal Incidence of Payroll Taxes with Imperfect Competition: Theory and Evidence," Papers 2210.15776, arXiv.org.

    More about this item

    Keywords

    Payroll Tax; Employment; Wages; Profits; Oligopsony;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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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