The Effets of Payroll Tax Subsidies for Low Wage Workers on Firms Level Decisions

Bruno Crépon and Rozenn Desplatz
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Rozenn Desplatz: Crest

No 2003-06, Working Papers from Center for Research in Economics and Statistics

Abstract: We study the effect of the large increase of payroll tax subsidies for low-wage workersthat occurred in France in 1995. We compute the ex ante changes in average labor costs in1994 solely due to the changes in the tax subsidies and consider it as a treatment variable.We extend the Rubin causal framework to the case of a continuous treatment, define theensuing parameters of interest and generalize the propensity score property. We find thatpayroll tax subsidies had a strong effects on employment and on other firms outcomes,stock of capital, share of unskilled workers and average labor cost.

Date: 2003
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