Visibility of social security contributions and employment

Inigo Iturbe-Ormaetxe

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Social security contributions in most countries are split between employers and employees. According to standard incidence analysis, social security contributions affect employment negatively, but it is irrelevant how they are divided between employers and employees. This paper considers the possibility that: (i) workers perceive a linkage between current contributions and future benefits and, (ii) they discount employers contributions more heavily, as they are less “visible”. Under these assumptions, I find that employer contributions have a stronger (negative) effect on employment than employee contributions. Furthermore, a change in how contributions are divided that reduces the share of employers is beneficial for employment. Finally, making employers contributions more visible to workers also has a positive effect on employment.

Keywords: Payroll tax; social security; tax incidence; tax visibility (search for similar items in EconPapers)
JEL-codes: D03 H22 H55 J08 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-07
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by Ivie

Downloads: (external link)
http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-16.pdf Fisrt version / Primera version, 2011 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2011-16

Access Statistics for this paper

More papers in Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Contact information at EDIRC.
Bibliographic data for series maintained by Departamento de Edición ().