Labour Costs and the Decision to Hire the First Employee

Bart Cockx and Sam Desiere

No 16122, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95% CI: −3.45, −1.25].

Keywords: payroll taxes; hiring decisions; nonemployers; small businesses (search for similar items in EconPapers)
JEL-codes: D22 H25 J08 J23 L26 M13 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2023-05
New Economics Papers: this item is included in nep-lma
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Citations: View citations in EconPapers (2)

Published - published in: European Economic Review, 2024, 170, 104859

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Related works:
Journal Article: Labour costs and the decision to hire the first employee (2024)
Working Paper: Labour Costs and the Decision to Hire the First Employee (2023)
Working Paper: Labour costs and the decision to hire the first employee (2023)
Working Paper: Labour costs and the decision to hire the first employee (2023)
Working Paper: Labour costs and the decision to hire the first employee (2023)
Working Paper: Labour costs and the decision to hire the first employee (2023)
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