2019

Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden

Reprint No. 2019:15

Author(s): Emmanuel Saez, Benjamin Schoefer and David SeimYear: 2019 Title: American Economic Review Volume (No.): 109 (5) Pages: 1717–1763
Online article (restrictions may apply)

This paper uses administrative data to analyze a large employer-borne payroll tax rate cut for young workers in Sweden. We find no effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, and a 2–3 percentage point increase in youth employment. Firms employing many young workers receive a larger tax windfall and expand right after the reform: employment, capital, sales, and profits increase. These effects appear stronger in credit-constrained firms. Youth-intensive firms also increase the wages of all their workers collectively, young as well as old, consistent with rent sharing of the tax windfall.

Reference:
Saez, Emmanuel, Benjamin Schoefer and David Seim (2019), "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden". American Economic Review 109(5), 1717–1763.

Interdisciplinary European Studies

The European Union in a Changing World Order

This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy.

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