Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246757 
Year of Publication: 
2019
Series/Report no.: 
HFI Working Paper No. 3
Publisher: 
Institute of Retail Economics (HFI), Stockholm
Abstract: 
One way for policymakers to reduce labor costs and stimulate the recruitment of marginalized groups of labor in a highly unionized economy is to lower payroll taxes. However, the efficiency of this policy instrument has been questioned, and previous evaluations have mostly found small employment effects for such reforms. We investigate the effects of a payroll tax cut in Sweden that decreased firms' labor costs in relation to the number of young employees that they had employed when the reform was implemented in 2007. We find that most firms received small labor cost savings as a result of the reform, but those that received larger cost savings increased their number of employees significantly more than firms that received no, or minor, labor cost savings. Our findings also suggest that the payroll tax cut increased the total wages paid to incumbent workers, but the wage effect was too small to offset the positive extensive-margin employment effect of the reform. In total, we find that the Swedish payroll tax reform created 18,100 jobs over the period 2006-2008; most of these jobs were within the targeted group of young employees.
Subjects: 
Payroll tax reform
labor demand
employment
wages
JEL: 
H25
H32
J23
J32
L20
Document Type: 
Working Paper

Files in This Item:
File
Size
979.05 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.