Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/236352
Authors: 
Kim, Jinyoung
Kim, Seonghoon
Koh, Kanghyock
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14321
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Despite unambiguous predictions of the canonical model of a competitive labor market, empirical studies on the labor market effects of payroll taxation provide conflicting evidence. Our meta-analysis shows that varying degrees of labor market competitiveness across places and time could be one explanation for the mixed results. We then estimate the labor market impacts of payroll taxation in Singapore, the country with most competitive and flexible labor market among the countries investigated in the literature. By exploiting the sharp reduction in payroll tax rate when workers turn 60, we find that the payroll tax cut in Singapore has a large effect on wages without changes in employment. We provide novel evidence corroborating the canonical model prediction that the welfare costs of social insurance programs financed by payroll taxes can be minimized in a competitive labor market.
Subjects: 
payroll tax
labor market outcomes
incidence
regression discontinuity design
meta-analysis
labor market competitiveness
JEL: 
H24
I31
J22
Document Type: 
Working Paper

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