Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?

88 Pages Posted: 12 Aug 2019

See all articles by Antoine Bozio

Antoine Bozio

Institute for Fiscal Studies (IFS)

Thomas Breda

Banque de France

Julien Grenet

Paris School of Economics (PSE)

Abstract

We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.

Keywords: tax incidence, payroll tax, social security contributions, tax-benefit linkage

JEL Classification: H22, H55

Suggested Citation

Bozio, Antoine and Breda, Thomas and Grenet, Julien, Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?. IZA Discussion Paper No. 12502. Available at SSRN: https://ssrn.com/abstract=3435377

Antoine Bozio (Contact Author)

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

HOME PAGE: http://www.ifs.org.uk

Thomas Breda

Banque de France ( email )

Paris
France

Julien Grenet

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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