Labour Costs and the Decision to Hire the First Employee

Arbeitspapier

Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95% CI: −3.45, −1.25].

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10425

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Business Taxes and Subsidies including sales and value-added (VAT) ; Labor Economics Policies ; Labor Demand ; Entrepreneurship ; New Firms; Startups
• Subject: nonemployers ; hiring decisions ; payroll taxes ; small businesses

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cockx, Bart ; Desiere, Sam
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279174
• Last update: 10.03.2025, 11:45 AM CET