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The Finnish Payroll Tax Cut Experiment Revisited

Government Institute for Economic Research Working Papers No. 22

44 Pages Posted: 14 Sep 2011  

Ossi Korkeamäki

Government Institute for Economic Research (VATT)

Date Written: April 13, 2011

Abstract

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.

Keywords: payroll-tax, labour demand, tax incidence

JEL Classification: J18, J23, J38, J58, J65, J68

Suggested Citation

Korkeamäki, Ossi, The Finnish Payroll Tax Cut Experiment Revisited (April 13, 2011). Government Institute for Economic Research Working Papers No. 22. Available at SSRN: https://ssrn.com/abstract=1926644 or http://dx.doi.org/10.2139/ssrn.1926644

Ossi Korkeamäki (Contact Author)

Government Institute for Economic Research (VATT) ( email )

Arkadiankatu 7
Helsinki, 00101
Finland

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