 Employment and Wage Effects of a Payroll-Tax Cut-Evidence from a Regional ExperimentOssi Korkeamäki and Roope Uusitalo No 443, Discussion Papers from VATT Institute for Economic Research Abstract: In this paper we evaluate the effects of a regional experiment that reduced payroll-taxes by 3–6 percentage points for three years in Northern Finland. We match each firm in the target region with a similar firm in a comparison region and estimate the effect of the payroll-tax reduction by comparing employment and wage changes within the matched pairs before and after the start of the experiment. According to our results the reduction in the payroll-taxes led to an increase in wages in the target region. The point estimates indicate that the increase in wages offset roughly half of the impact of the payroll tax cut on the labor costs. The remaining labor cost reduction had no significant effects on employment. JEL-codes: J18, J23, J38, J58, J65, J6 Keywords: Payroll-tax; Labor demand; Tax incidence; Propensity score matching; Labour market; Työmarkkinat; Regional development; Aluekehitys; Taxation; Verotus; Labor market and policies promoting economic growth; Työmarkkinat ja kasvua tukeva politiikka (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fer:dpaper:443 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Discussion Papers from VATT Institute for Economic Research Contact information at EDIRC. |
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