Employment and Wage Effects of Social Security Financing: An Empirical Analysis of the West German Experience and some Policy Simulations

Viktor Steiner

No 96-14, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper follows up recent work on the relationship between (un?)employment and wage effects of social security financing undertaken by the OECD Jobs Study. Based on a simple macroeconometric model of the labour market, I investigate whether the peculiar OECD results for Germany on the incidence of social security contributions and taxes also hold up within a somewhat different model. The study also provides some policy simulations to answer the topical question whether increasing indirect taxes to finance a reduction of the contribution rates to social security levied on employees and employers in Germany. The main result of the paper is that there is in fact a positive short?run employment effect of a revenue neutral switch of financing social security expenditures by increasing indirect taxes and reducing employers' contribution rates, but in the longer?term only modest effects remain due to higher wages.

JEL-codes: E24 H55 J38 (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7130

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