Wage Effects of Means-Tested Transfers: Incidence Implications of Using Firms as Intermediaries

Santiago Garriga and Darío Tortarolo

CEFIP, Working Papers from CEFIP, Universidad Nacional de La Plata

Abstract: We show that how countries disburse tax credits matters for economic incidence. We exploit a reform in Argentina that shifted the disbursement of child benefits from employers to the government in a staggered fashion. Using administrative data and an event-study approach, we find that employers receive 5 to 13 percent of the transfers through reduced wages when they mediate the payments. This wage effect is more pronounced for low-income workers, particularly new hires, and in smaller and less unionized firms. We argue that workers likely misperceived firm-disbursed transfers as part of their work compensation, leading to incidence-sharing effects. Our findings suggest that relying on firms as intermediaries in the tax-benefit system can have unexpected labor market consequences.

JEL-codes: H23 H31 H71 I38 J31 J32 J33 (search for similar items in EconPapers)
Pages: 105 pages
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:akh:wcefip:052

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