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Wage and Employment Effects of Payroll Taxes and Investment Subsidies

Author

Listed:
  • Johansen, F.
  • Klette, T.J.

Abstract

Using a set of panel data for manufacturing plants we study how payrll taxes and investment subsidies affect wages and demand for labor and capital. We exploit changes in the regional subsidy schemes for labor anf capital in Norway. Our empirical analysis finds that a large part of changes in payroll taxes is shifted over to wages. This result suggests that changes in payroll taxes have a limited direct effect on employment.

Suggested Citation

  • Johansen, F. & Klette, T.J., 1998. "Wage and Employment Effects of Payroll Taxes and Investment Subsidies," Memorandum 1998_027, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:1998_027
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    Citations

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    Cited by:

    1. Korkeamäki, Ossi & Uusitalo, Roope, 2006. "Employment Effects of a Payroll-Tax Cut: Evidence from a Regional Tax Exemption Experiment," Discussion Papers 407, VATT Institute for Economic Research.
    2. Gavrilova, Evelina & Zoutman, Floris T. & Hopland, Arnt O., 2017. "How to Use One Instrument to Identify Two Elasticities," Discussion Papers 2017/2, Norwegian School of Economics, Department of Business and Management Science.
    3. Hildegunn Ekroll Stokke, 2015. "Regional payroll tax cuts and individual wages: Heterogeneous effects across education groups," Working Paper Series 16815, Department of Economics, Norwegian University of Science and Technology.
    4. Ku, Hyejin & Schönberg, Uta & Schreiner, Ragnhild C., 2020. "Do place-based tax incentives create jobs?," Journal of Public Economics, Elsevier, vol. 191(C).
    5. Kim, Jinyoung & Kim, Seonghoon & Koh, Kanghyock, 2022. "Labor market institutions and the incidence of payroll taxation," Journal of Public Economics, Elsevier, vol. 209(C).
    6. Bennmarker, Helge & Mellander, Erik & Öckert, Björn, 2009. "Do regional payroll tax reductions boost employment?," Labour Economics, Elsevier, vol. 16(5), pages 480-489, October.
    7. Jonas Månsson & A. Quoreshi, 2015. "Evaluating regional cuts in the payroll tax from a firm perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 323-347, March.
    8. Ossi Korkeamäki, 2011. "The Finnish payroll tax cut experiment revisited, or where did the money go?," ERSA conference papers ersa11p898, European Regional Science Association.
    9. Hyejin Ku & Uta Schönberg & Ragnhild C. Schreiner, 2018. "How Do Firms Respond to Place-Based Tax Incentives?," RF Berlin - CReAM Discussion Paper Series 1811, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    10. Ossi Korkeamäki & Roope Uusitalo, 2009. "Employment and wage effects of a payroll-tax cut—evidence from a regional experiment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(6), pages 753-772, December.
    11. Korkeamäki, Ossi, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, VATT Institute for Economic Research.

    More about this item

    Keywords

    WAGES ; LABOUR MARKET ; TAXATION;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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