The Effect of the Swedish Payroll Tax Cut for Youths on Firm Profitability

39 Pages Posted: 12 Oct 2016

See all articles by Arvid Malm

Arvid Malm

Royal Institute of Technology (KTH) - Department of Industrial Economics and Management (INDEK)

Johan E Eklund

Jonkoping University - Jonkoping International Business School (JIBS); Swedish Entrepreneurship Forum

David Francis

World Bank, Development Economics

Nan Jiang

World Bank

Date Written: October 11, 2016

Abstract

Payroll taxes in Sweden were reduced substantially for people ages 26 years or younger on July 1, 2007. The objective of this tax cut was to lower youth unemployment. The question of how gains from payroll taxes are distributed between workers and owners of firms has been the focus of considerable theoretical and empirical attention. This paper examines the impact of the Swedish reform on firm profits using individual-level and firm-level microdata. Previous investigations into the effects of this particular reform have focused entirely on the effects on employment and wages, or have been limited to the retail sector. This paper finds that the reform was not associated with a general increase in firm profitability, but that there is some evidence of a positive effect on profits in the retail and wholesale sector.

Keywords: Consumption, Fiscal & Monetary Policy, Private Sector Development Law, Marketing, Private Sector Economics

Suggested Citation

Malm, Arvid and Eklund, Johan Erik and Francis, David and Jiang, Nan, The Effect of the Swedish Payroll Tax Cut for Youths on Firm Profitability (October 11, 2016). World Bank Policy Research Working Paper No. 7854, Available at SSRN: https://ssrn.com/abstract=2851252

Arvid Malm (Contact Author)

Royal Institute of Technology (KTH) - Department of Industrial Economics and Management (INDEK) ( email )

Stockholm, 100 44
Sweden

Johan Erik Eklund

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

Swedish Entrepreneurship Forum ( email )

Södra Kungstornet
Kungsgatan 33, 7tr
Stockholm, 11156
Sweden

David Francis

World Bank, Development Economics ( email )

1818 H St NW
Washington, DC 20433
United States

Nan Jiang

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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