Phasing out payroll tax subsidies

Anna Herget and Regina T. Riphahn ()
Additional contact information
Anna Herget: Friedrich-Alexander-University Erlangen-Nürnberg
Regina T. Riphahn: Friedrich-Alexander-University Erlangen-Nürnberg

International Tax and Public Finance, 2025, vol. 32, issue 5, No 7, 1531 pages

Abstract: Abstract Many countries subsidize low-income employments or small jobs. These subsidies and their phasing out can generate labor market frictions and distort incentives. The German Minijob program subsidizes low-income jobs. It generates a ‘Minijob trap’ with substantial bunching along the earnings distribution. Since 2003, the newly introduced Midijob subsidy aims to reduce the Minijob-induced notch in the net earnings distribution. Midijobs reduce payroll taxes for employments above the Minijob earnings ceiling. We investigate whether introducing Midijobs reduced the Minijob trap. We apply a regression discontinuity design using administrative data and a difference-in-differences estimation using survey data. While in both cases our results show a small positive overall effect of Midijobs on transitions out of Minijobs, they are effective only for a narrow treatment group.

Keywords: Midijobs; Minijobs; Payroll tax subsidy; Causal effects; Difference-in-differences; Regression discontinuity; SOEP; SIAB (search for similar items in EconPapers)
JEL-codes: H24 J21 J38 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10797-024-09879-0 Abstract (text/html)
Access to full text is restricted to subscribers.

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:itaxpf:v:32:y:2025:i:5:d:10.1007_s10797-024-09879-0

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-024-09879-0

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().