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Payroll taxes for financing training in developing countries

  • Ziderman, Adrian
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    In most developing countries, the major programs of vocational training and manpower-skill development are financed from general revenues. Increasingly, however, earmarked payroll taxes are employed to finance training. This paper summarizes international experience with these payroll taxes, drawing the distinction between the more traditional revenue raising schemes on the lines of the Latin American model and the newer levy-grant schemes. Drawing upon experience of payroll taxes in advanced economies it discusses the incidence of these taxes in developing countries and presents an economic rationale for their growing use, as part of a reverse social security scheme. The paper concludes that the desirability of using payroll taxes to finance training, compared to other alternatives available to developing country governments, is likely to be contingent upon the stage of a country's development.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 141.

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    Date of creation: 31 Jan 1989
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    Handle: RePEc:wbk:wbrwps:141
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    1. Vroman, Wayne, 1974. "Employer Payroll Tax Incidence: Empirical Tests with Cross-Country Data," Public Finance = Finances publiques, , vol. 29(2), pages 184-200.
    2. Holmlund, Bertil, 1983. " Payroll Taxes and Wage Inflation: The Swedish Experience," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(1), pages 1-15.
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