Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

Youssef Benzarti and Jarkko Harju

Journal of the European Economic Association, 2021, vol. 19, issue 5, 2737-2764

Abstract: This paper uses quasi-experimental variation in payroll tax rates in Finland to investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee-level earnings. As payroll taxes increase, firms substitute away from low-skilled, routine, and manual workers. Higher firm-level payroll tax rates also slightly decrease the total output of firms. Our results imply that firm-level production and input factor choices are clearly affected by payroll taxes.

Date: 2021
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Citations: View citations in EconPapers (25)

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Related works:
Working Paper: Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production (2021)
Working Paper: Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:19:y:2021:i:5:p:2737-2764.

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