Memorandum,
Oslo University, Department of Economics

Abstract: Using a set of panel data for manufacturing plants we study how payrll taxes and investment subsidies affect wages and demand for labor and capital. We exploit changes in the regional subsidy schemes for labor anf capital in Norway. Our empirical analysis finds that a large part of changes in payroll taxes is shifted over to wages. This result suggests that changes in payroll taxes have a limited direct effect on employment.

Keywords: WAGES; LABOUR MARKET; TAXATION

JEL-codes: E24; H25

21 pages, 1998

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