Do place-based tax incentives create jobs?

Hyejin Ku, Uta Schönberg and Ragnhild C. Schreiner

Journal of Public Economics, 2020, vol. 191, issue C

Abstract: In this paper, we evaluate the effectiveness of place-based payroll taxes in stimulating local employment by exploiting a unique policy setting in Norway, where a system of geographically differentiated payroll taxes was suddenly abolished due to an EU regulation. The reform was enforced independently of the regional labor market developments, creating arguably exogenous variation in the payroll tax rates that firms in different local labor markets faced over time. We find evidence of partial shifting of payroll tax increases on to worker wages as well as a significant decline in local employment. These findings suggest that in settings with some degrees of wage rigidity, place-based payroll tax incentives can be effective in stimulating local employment.

Keywords: Place-based policies; Payroll taxes; Regional tax incentives; Labor cost; Firm behavior (search for similar items in EconPapers)
JEL-codes: D22 H25 H32 J18 J23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Chapter: Do Place-Based Tax Incentives Create Jobs? (2018)
Working Paper: Do Place-Based Tax Incentives Create Jobs? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:191:y:2020:i:c:s0047272719301665

DOI: 10.1016/j.jpubeco.2019.104105

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