Labor market institutions and the incidence of payroll taxation

Jinyoung Kim; Seonghoon Kim; Kanghyock Koh

doi:10.1016/j.jpubeco.2022.104646

Labor market institutions and the incidence of payroll taxation

Jinyoung Kim, Seonghoon Kim, Kanghyock Koh

Department of Economics

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Article number	104646
Journal	Journal of Public Economics
Volume	209
DOIs	https://doi.org/10.1016/j.jpubeco.2022.104646
Publication status	Published - 2022 May

Bibliographical note

Funding Information:
We thank the co-editor, Jeffrey Clemens, and three anonymous referees for their valuable comments and suggestions. J. Kim is supported by a Korea University Grant (K2201601). S. Kim is supported by the Ministry of Education, Singapore under its Academic Research Fund Tier 3 (MOE2019-T3-1-006 and MOE2013-T3-1-009). Koh is supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A03064205). We thank Wonjun Lyou for research assistance and Wensi Lim for coordinating the collection of anecdotal evidence. All errors are our own.

Funding Information:
We thank the co-editor, Jeffrey Clemens, and three anonymous referees for their valuable comments and suggestions. J. Kim is supported by a Korea University Grant (K2201601). S. Kim is supported by the Ministry of Education, Singapore under its Academic Research Fund Tier 3 (MOE2019-T3-1-006 and MOE2013-T3-1-009). Koh is supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A03064205). We thank Wonjun Lyou for research assistance and Wensi Lim for coordinating the collection of anecdotal evidence. All errors are our own.

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

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

ASJC Scopus subject areas

Finance
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jpubeco.2022.104646

Cite this

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title = "Labor market institutions and the incidence of payroll taxation",

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.",

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author = "Jinyoung Kim and Seonghoon Kim and Kanghyock Koh",

note = "Funding Information: We thank the co-editor, Jeffrey Clemens, and three anonymous referees for their valuable comments and suggestions. J. Kim is supported by a Korea University Grant (K2201601). S. Kim is supported by the Ministry of Education, Singapore under its Academic Research Fund Tier 3 (MOE2019-T3-1-006 and MOE2013-T3-1-009). Koh is supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A03064205). We thank Wonjun Lyou for research assistance and Wensi Lim for coordinating the collection of anecdotal evidence. All errors are our own. Funding Information: We thank the co-editor, Jeffrey Clemens, and three anonymous referees for their valuable comments and suggestions. J. Kim is supported by a Korea University Grant (K2201601). S. Kim is supported by the Ministry of Education, Singapore under its Academic Research Fund Tier 3 (MOE2019-T3-1-006 and MOE2013-T3-1-009). Koh is supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A2A03064205). We thank Wonjun Lyou for research assistance and Wensi Lim for coordinating the collection of anecdotal evidence. All errors are our own. Publisher Copyright: {\textcopyright} 2022 Elsevier B.V.",

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Labor market institutions and the incidence of payroll taxation

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

UN SDGs

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