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
Citation
KIM, Jinyoung; KIM, Seonghoon; and KOH, Kanghyock.
Labor market institutions and the incidence of payroll taxation. (2022). Journal of Public Economics. 209, 1-18.
Available at: https://ink.library.smu.edu.sg/soe_research/2606
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jpubeco.2022.104646