Firm heterogeneity and the impact of payroll taxes

Arbeitspapier

We study the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, we examine the heterogeneous impact of the policy. Employment increases most at low-productivity firms offering low-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms offering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Working Papers ; No. 22/49

Classification and Topics

• Classification: Wirtschaft ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Fiscal Policies and Behavior of Economic Agents: Firm ; Labor Demand ; Wage Level and Structure; Wage Differentials
• Subject: payroll tax ; tax incidence ; firm heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bíró, Anikó ; Branyiczki, Réka ; Lindner, Attila ; Márk, Lili ; Prinz, Daniel
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2022

Further information

• DOI: doi:10.1920/wp.ifs.2022.4922
• Handle: http://hdl.handle.net/10419/284219
• Last update: 10.03.2025, 11:45 AM CET