Payroll Taxes, Wages and Employment: Identification Through Policy Changes

33 Pages Posted: 12 Jan 2010  

Guillermo Cruces

Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS); IZA

Sebastian Galiani

University of Maryland - Department of Economics

Susana Kidyba

affiliation not provided to SSRN

Date Written: January 11, 2010

Abstract

This paper investigates the effect of changes in payroll taxes on wages and employment in Argentina. The analysis, based on administrative data, focuses on the impact of a series of major changes in payroll taxes which varied across geographical areas. This setup offers two main advantages over previous studies. First, using longitudinal data, the variation in tax rates across space and time provides a plausible source of identification of their effects on employment and wages. Second, the use of legal tax rates for each area at each point in time provides a remedy for the measurement error bias raised by the use of empirical rates constructed from observed tax and wage bills. Once this bias is accounted for, the results indicate that changes in payroll tax rates are only partially shifted onto wages, and they point to the absence of any significant effect on employment.

Keywords: Payroll taxes, Employment and wages

JEL Classification: J08, J32

Suggested Citation

Cruces, Guillermo and Galiani, Sebastian and Kidyba, Susana, Payroll Taxes, Wages and Employment: Identification Through Policy Changes (January 11, 2010). Labour Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1535113 or http://dx.doi.org/10.2139/ssrn.1535113

Guillermo Cruces (Contact Author)

Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) ( email )

Centro de Estudios Distributivos, Laborales y
Sociales, Calle 6 e/47 y 48
La Plata, Provincia de Buenos Aires 1900
Argentina

HOME PAGE: http://cedlas.econo.unlp.edu.ar

IZA

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

Sebastian Galiani

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Susana Kidyba

affiliation not provided to SSRN ( email )

Paper statistics

Downloads
84
Rank
246,636
Abstract Views
442