Affiliation:
1. University of California, Santa Barbara
2. Tampere University and VATT Institute for Economic Research
Abstract
Abstract
This paper uses quasi-experimental variation in payroll tax rates in Finland to investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee-level earnings. As payroll taxes increase, firms substitute away from low-skilled, routine, and manual workers. Higher firm-level payroll tax rates also slightly decrease the total output of firms. Our results imply that firm-level production and input factor choices are clearly affected by payroll taxes.
Funder
University of Mannheim
University of Turku
University of South Carolina
UC Berkeley
Publisher
Oxford University Press (OUP)
Subject
General Economics, Econometrics and Finance
Cited by
15 articles.
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