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  3. American Economic Review
  4. May 2019
  5. Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden

Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden

  • Emmanuel Saez
  • Benjamin Schoefer
  • David Seim
American Economic Review
vol. 109, no. 5, May 2019
(pp. 1717-63)
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Abstract

This paper uses administrative data to analyze a large employer-borne payroll tax rate cut for young workers in Sweden. We find no effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, and a 2–3 percentage point increase in youth employment. Firms employing many young workers receive a larger tax windfall and expand right after the reform: employment, capital, sales, and profits increase. These effects appear stronger in credit-constrained firms. Youth-intensive firms also increase the wages of all their workers collectively, young as well as old, consistent with rent sharing of the tax windfall.

Citation

Saez, Emmanuel, Benjamin Schoefer, and David Seim. 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden." American Economic Review, 109 (5): 1717-63. DOI: 10.1257/aer.20171937

Additional Materials

JEL Classification

  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H32 Fiscal Policies and Behavior of Economic Agents: Firm
  • J13 Fertility; Family Planning; Child Care; Children; Youth
  • J23 Labor Demand
  • J31 Wage Level and Structure; Wage Differentials
  • M51 Personnel Economics: Firm Employment Decisions; Promotions