The Incidence of Pension Contributions: A Panel Based Analysis of the Impact of Pension Contributions on Labor Cost, Wages and Labor Supply

Nicole Bosch (), Casper Ewijk, Maja Micevska Scharf () and Sander Muns ()
Additional contact information
Nicole Bosch: CPB Netherlands Bureau for Economic Policy Analysis
Maja Micevska Scharf: CPB Netherlands Bureau for Economic Policy Analysis
Sander Muns: Netspar

De Economist, 2022, vol. 170, issue 1, No 5, 107-132

Abstract: Abstract One of the key elements in the planned pension reform in the Netherlands is to abolish the implicit subsidy from younger to older workers inherent in pension schemes with age independent contribution and accrual rates. This paper investigates the impact of changes in contribution rates on wages, labor costs and labor supply using a rich administrative data set covering individual employees in the Netherlands for the period 2006–2012. With a panel-based approach and data on both marginal and average contribution rates we aim to provide insight into the mechanisms underlying the incidence and labor supply (in hours) effects of pension contributions. For a two-year change in pension contributions we find that 70% of this change is passed on to the labor costs of employers, while 30% is passed on to the net wage of the employee. No significant effects are found for labor supply. At least in the short and medium run, our results seem at variance with the standard demand-and-supply model for the labor market, but are consistent with a bargaining model.

Keywords: Incidence; Pension contributions; Labor supply (search for similar items in EconPapers)
JEL-codes: H22 H30 J32 J38 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10645-022-09401-z

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