Publication Type

Journal Article

Version

submittedVersion

Publication Date

5-2022

Abstract

Despite the unambiguous predictions of the canonical model of a competitive labor market, empirical studies of the labor market effects of payroll taxation provide conflicting evidence. We estimate the labor market impacts of payroll taxation in Singapore, the country with the 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 reduced payroll tax rate in Singapore has a large effect on wages without changes in employment. Our meta-analysis shows consistent evidence that varying degrees of labor market competitiveness across places and time could explain the mixed results in the literature. Our findings corroborate the prediction of the canonical model that the welfare costs of social insurance programs financed by payroll taxes can be small in a competitive labor market.

Keywords

Labor market competitiveness, Labor market outcomes, Meta-analysis, Payroll tax, Regression discontinuity design, Tax incidence

Discipline

Asian Studies | Labor Economics | Taxation

Research Areas

Applied Microeconomics

Publication

Journal of Public Economics

Volume

209

First Page

1

Last Page

18

ISSN

0047-2727

Identifier

10.1016/j.jpubeco.2022.104646

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jpubeco.2022.104646

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