The Finnish payroll tax cut experiment revisited, or where did the money go?
In this paper I evaluate the effects of a regional experiment that reduced payroll-taxes by 3â€“6 percentage points of the firmâ€™s wage sum in Northern and Eastern Finland. I estimate the effect of the payroll-tax reduction on firmsâ€™ employment, wage sum and profits, and on workers hourly pay and monthly hours worked, by comparing employment and wage changes before and after the start of the experiment to a control region. According to my results, the reduction in the payroll-taxes did not lead to any clear cut aggregate effects in the target region.
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