Payroll Tax, Employment and Labor Market Concentration

Erick Baumgartner, Raphael Corbi () and Renata Narita ()
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Erick Baumgartner: Bocconi University
Raphael Corbi: University of Sao Paulo
Renata Narita: PUC-Rio

No 18838, IZA Discussion Papers from IZA Network @ LISER

Abstract: How much employment can be generated by decreasing payroll taxes? We examine this question by exploring the staggered rollout of a large payroll tax reform in Brazil. Using administrative matched employer-employee data, we find an increase of 5 percent on employment due to both firm growth and firm entry, no impact on wages and a significant increase in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent with predictions from an oligopsony model.

Keywords: payroll tax; employment; wages; profits; oligopsony (search for similar items in EconPapers)
JEL-codes: H2 J3 J42 J6 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp18838

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