The effect of payroll taxes on employment and wages under high labor informality
نویسنده
چکیده
This paper evaluates the effects of a fall in payroll taxes on employment and wages in the presence of high labor informality. For that purpose, the paper examines a recently approved tax reform in Colombia especially targeted to promote labor formality. The model suggests that the reform would increase total employment by between 0.3 to 0.5 percent and formal employment by between 3.4 to 3.7 percent over the pre-reform scenario. In addition, formal wage rates would increase by 4.9 percent as a result of the reform. This finding suggests that the pass-through effect in labor markets may be large in these economies. JEL codes: E62; H26; J21; O170
منابع مشابه
Payroll Taxation in Canada: An Overview
Despite constituting the third most important source of revenue for Canadian governments, payroll taxes receive relatively little attention. This is particularly surprising on two counts: first, there are important controversies regarding the employment effects of these taxes and, second, payroll taxes have grown substantially over the last 30 years and are likely to continue to increase in the...
متن کاملTHE LABOR MARKET EFFECTS OF PAYROLL TAXES IN A MIDDLE- INCOME COUNTRY: EVIDENCE FROM COLOMBIA By,
We use a panel of manufacturing plants from Colombia to analyze how the rise in payroll tax rates over the 1980s and 1990s affected the labor market. Our estimates indicate that formal wages fall by between 1.4% and 2.3% as a result of a 10% rise in payroll taxes. This “less-than-full-shifting” is likely to be the result of weak linkages between benefits and taxes and the presence of downward w...
متن کاملThe Labor Market Effects of Payroll Taxes in a Middle-income Country: Evidence from Colombia
We use a panel of manufacturing plants from Colombia to analyze how the rise in payroll tax rates over the 1980’s and 1990’s affected the labor market. Our estimates indicate that formal wages fall by between 1.4% and 2.3% as a result of a 10% rise in payroll taxes. This “less-than-full-shifting” is likely to be the result of weak linkages between benefits and taxes and the presence of downward...
متن کاملPayroll Taxation and the structure of qualifications and wages in a segmented frictional labor market with intra-firm bargaining
The present paper investigate the incidence of payroll taxation and more generally labor incomme taxation in a search and mathching model. The model considered a production function with different type of workers, allowing to understand the interactions between segented labor markets. Furthermore, the equilibrium is reach through a double process of intra firm wage bargaining ex post and labor ...
متن کاملThe Impact of Payroll Tax Reductions on Employment and Wages: A Natural Experiment Using Firm Level Data
Past evidence on the incidence of payroll tax subsidies on employment and wages for disadvantaged workers has been quite mixed. Therefore, this paper makes use of a unique panel of firm level data and a natural experiment to analyze the incidence of wage subsidies on full-time manual workers and pre-tax wages. Using a number of straightforward evaluation estimators we find that employment subsi...
متن کامل