Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
Do regional payroll tax reductions boost employment?
(), Erik Mellander
() and Björn Öckert
Abstract: Using a Difference-in-Differences approach we evaluate the
effects of a 10 percentage points reduction in the payroll tax introduced
in 2002 for firms in the northern part of Sweden. We find no employment
effects for existing firms and can rule out that a 1 percentage point
payroll tax reduction would increase employment with more than 0.2 percent.
We do, however, find that tax reductions have significantly positive
effects on the average wage bill per employee. These are likely to be
driven by higher average wages, but might also be due to more hours worked.
As a sensitivity check we investigate if reduced payroll taxes affect the
likelihood of firm entry and exit, and find some support for a net firm
inflow. Our attempts to assess concomitant effects on employment indicate
that payroll tax reductions might yield increases in employment through the
start-up of new firms.
Keywords: Payroll tax; Labour demand; Incidence; Firm entry/exit; Difference-in-Differences; (follow links to similar papers)
JEL-Codes: H22; J23; J38; J58; J68; (follow links to similar papers)
33 pages, September 5, 2008
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Monica Fällgren ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom