Wage effects of non-wage labour costs

María Cervini-Plá, Xavi Ramos () and José Silva

European Economic Review, 2014, vol. 72, issue C, 113-137

Abstract: We study wage effects of two important elements of non-wage labour costs: firing costs and payroll taxes. We exploit a reform that introduced substantial reduction in these two provisions for unemployed workers aged less than 30 and over 45years who got a permanent job. A matching model with heterogeneous workers predicts positive wage effects of reducing firing costs but ambiguous wage effects of reducing payroll taxes, for both new entrant and incumbent workers. Difference-in-differences estimates and simulation of the model show positive wage effects for both new entrant and incumbent workers. The reduction in firing costs accounts for up to half of the overall wage increase for new entrants but only 10% for incumbents.

Keywords: Dismissal costs; Payroll tax; Evaluation of labour market reforms; Difference-in-difference; Matching model (search for similar items in EconPapers)
JEL-codes: C23 D31 J31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Wage effects of non-wage labour costs (2011)
Working Paper: Wage Effects of Non-Wage Labour Costs (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:72:y:2014:i:c:p:113-137

DOI: 10.1016/j.euroecorev.2014.09.005

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