Social Security Driven Tax Wedge and Its Effects on Employment and Shadow Employment

51 Pages Posted: 27 Dec 2009 Last revised: 3 Feb 2010

See all articles by Marek Góra

Marek Góra

Warsaw School of Economics (SGH); IZA Institute of Labor Economics

Oleksandr Rohozynsky

Kyiv School of Economics; EERC

Irina Sinitsina

CASE - Center for Social and Economic Research

Mateusz Walewski

CASE

Date Written: December 2009

Abstract

The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.

Keywords: tax wedge, employment, shadow employment, transition economies

JEL Classification: E24, J3, H21, O17

Suggested Citation

Góra, Marek and Rohozynsky, Oleksandr and Sinitsina, Irina and Walewski, Mateusz, Social Security Driven Tax Wedge and Its Effects on Employment and Shadow Employment (December 2009). CASE Network Studies and Analysis No. 398/2009, Available at SSRN: https://ssrn.com/abstract=1527025 or http://dx.doi.org/10.2139/ssrn.1527025

Marek Góra (Contact Author)

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Oleksandr Rohozynsky

Kyiv School of Economics ( email )

vul. Yakira 13, office 334
Kyiv, 04119
Ukraine
+380444928012 (Phone)

HOME PAGE: http://www.kse.org.ua

EERC ( email )

vul Yakira 13, office 334
Kyiv, 04119
Ukraine
+1-404-418-6698 (Phone)

HOME PAGE: http://www.eerc.ru

Irina Sinitsina

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
00-944 Warsaw, 01-031
Poland

Mateusz Walewski

CASE ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

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