Can Payroll Tax Cuts Help Firms During Recessions? / Youssef Benzarti, Jarkko Harju.

Format:

Book

Author/Creator:

Benzarti, Youssef.

Contributor:

National Bureau of Economic Research.

Harju, Jarkko.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27485.

NBER working paper series no. w27485

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This paper estimates the effect of payroll tax cuts on firm activity during economic downturns. We use two regional payroll tax cuts in Finland as well as the onset of the Great Recession to estimate the effect of the recession on firms treated by the payroll tax cuts compared to a similar control group. When implemented, prior to the Great Recession, we estimate that the payroll tax cuts had limited effects on firms located in the treated regions. However, when the recession starts, some of its negative effects were substantially hampered by the previously enacted payroll tax cuts in treated firms. These effects are exacerbated for men and low-skilled employees. We also find that sales and profits in treated firms respond differently in treated firms during the recession. This shows that payroll tax cuts can make firms more resilient during downturns.

Notes:

Print version record

July 2020.