The Finnish Payroll Tax Cut Experiment Revisited
Government Institute for Economic Research (VATT)
April 13, 2011
Government Institute for Economic Research Working Papers No. 22
In this paper I evaluate the effects of a regional experiment that reduced payroll taxes by 3–6 percentage points of the firms’ wage sum in northern and eastern Finland. I estimate the effect of the payroll tax reduction on firms’ employment levels, wage sum and profits, and on workers’ hourly pay and monthly hours worked, by comparing the changes in employment and wages before and after the start of the experiment to a control region. My results indicate that the reduction in payroll taxes did not lead to any unequivocal aggregate effects in the target region.
Number of Pages in PDF File: 44
Keywords: payroll-tax, labour demand, tax incidence
JEL Classification: J18, J23, J38, J58, J65, J68
Date posted: September 14, 2011
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