Firm Heterogeneity and the Impact of Payroll Taxes

Anikó Bíró, Réka Branyiczki, Attila Lindner, Lili Márk and Daniel Prinz

No 10265, Policy Research Working Paper Series from The World Bank

Abstract: This paper studies the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, the paper examines the heterogeneous impact of the policy. Employment increases most at low-productivity firms offering low-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms offering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.

Date: 2022-12-14
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Related works:
Working Paper: Firm Heterogeneity and the Impact of Payroll Taxes (2022)
Working Paper: Firm heterogeneity and the impact of payroll taxes (2022)
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