The Contribution of Payroll Taxation to Wage Inequality in France
49 Pages Posted: 9 Jun 2020
Over the 1967-2015 period, net wage inequality has decreased in France by 25%, in contrast to the significant increase experienced by most developed countries. Less well known is the fact that labor cost inequality has actually increased by 8% over the same period. We show that, (a) standard demand-side explanations for the rise in inequality apply in France when tested using measures of labor cost (as they should be); (b) reforms to payroll taxation, jointly with increases in the minimum wage, can explain a large part of the decrease in net wage inequality, in the context of increasing market inequality.
Keywords: wage inequality, labor cost, payroll tax, Social Security contributions, tax incidence
JEL Classification: I24, J24, J31
Suggested Citation: Suggested Citation