Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/78663
Authors: 
Korkeamäki, Ossi
Uusitalo, Roope
Year of Publication: 
2006
Series/Report no.: 
Working Paper, IFAU - Institute for Labour Market Policy Evaluation 2006:10
Abstract: 
In this paper we evaluate the effects of a regional experiment that reduced payroll-taxes by 3–6 percentage points for three years in Northern Finland. We match each firm in the target region with a similar firm in the control region and estimate the effect of the payroll-tax reduction by comparing employment and wage changes within the matched pairs before and after the start of the experiment. According to our results the reduction in the payroll-taxes led to somewhat faster wage growth in the target region. The increase in wages offset roughly half of the impact of the payroll tax cut on the labour costs. The remaining labour cost reduction had no significant effects on employment.
Subjects: 
Payroll-tax
Labour demand
Tax incidence
Propensity score matching
JEL: 
J18
J23
J38
J58
J65
J68
Document Type: 
Working Paper

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