The Incidence of Social Security Contributions in the United Kingdom: Evidence from Discontinuities at Contribution Ceilings

Stuart Adam, Barra Roantree () and David Phillips
Additional contact information
Stuart Adam: Institute for Fiscal Studies
David Phillips: Institute for Fiscal Studies

De Economist, 2017, vol. 165, issue 2, No 4, 203 pages

Abstract: Abstract This paper investigates the incidence of National Insurance contributions (NICs) in the UK, exploiting the ceiling that applied to employee and employer contributions between 1975 and 1985 and to employee contributions only between 1986 and 2007. Using data from the New Earnings Survey Panel Dataset, a mandatory survey of British employers’ payroll records, we show there was no dip in the earnings density at the ceiling in either period, suggesting that the earnings of those near the ceiling were unresponsive to the change in tax rates. The absence of such a dip allows us to test which of labour cost, gross earnings or net earnings are smooth around the threshold. As shown by Alvaredo et al. (De Econ, 2017. doi: 10.1007/s10645-017-9294-7 ), this is informative about the incidence of the change in tax rates at the threshold on those located nearby. We cannot reject the hypothesis that it is gross earnings that are smooth around the threshold, which may reflect a substantive role for statutory incidence in determining economic incidence. However, a lack of statistical power means that, while in some cases we can reject the hypotheses that the full economic incidence of NICs are borne by one side of the market, our results taken alone are also consistent with a wide range of less extreme incidence shares.

Keywords: Public economics; Tax incidence; Social security contributions (search for similar items in EconPapers)
JEL-codes: H0 H22 H24 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10645-017-9295-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:kap:decono:v:165:y:2017:i:2:d:10.1007_s10645-017-9295-6

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10645/PS2

DOI: 10.1007/s10645-017-9295-6

Access Statistics for this article

De Economist is currently edited by Rob Alessie, Bas ter Weel, Casper van Ewijk, Jan C. van Ours and Frank de Jong

More articles in De Economist from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().