Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110969
Authors: 
Neumann, Michael
Year of Publication: 
2015
Series/Report no.: 
DIW Discussion Papers 1489
Abstract: 
This paper exploits discontinuities induced by earnings caps for social security contributions (SSC) in Germany to analyse the effect of SSC on gross labour earnings. Empirical evidence is based on two complementary approaches utilising two administrative data sets. First, employment responses to SSC at the intensive margin are identified by a modified bunching approach that is applied to kinks in the budget set generated by the earnings caps. Second, I exploit an increase ofa regional earnings cap of health and long-term care insurance as a natural experiment. In order to analyse economic incidence a difference-in-differences approach is used to estimate the effects on gross earnings. I find employment responses to be negligible and the burden of SSC to be shared equally between employers and employees. Both results turn out to be robust and are consistent with a competitive labour market model.
Subjects: 
Social Security Contributions
Tax Incidence
Labour Supply Elasticities
Labour Demand Elasticities
Bunching
JEL: 
H22
H24
J38
Document Type: 
Working Paper

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