The Incidence of Payroll Taxation: Evidence from Chile / Jonathan Gruber.

Format:

Book

Author/Creator:

Gruber, Jonathan.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5053.

NBER working paper series no. w5053

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Incidence of Payroll Taxation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

Despite the growing reliance on payroll taxation worldwide, there is limited evidence on the incidence of payroll taxes. I provide new evidence by examining the experience of Chile before and after the privatization of its Social Security system. This policy change led to a sharp exogenous reduction in the payroll tax burden on Chilean firms; the average payroll tax rate in my sample fell from 30% to 5% over this six year period. I use data from a census of manufacturing firms, which contains information on firm specific tax payments and average wages. I find strong evidence that the incidence of payroll taxation was fully on wages, with no effect on employment. A potential weakness with this approach is that some of the variation in firm-specific tax rates may be spurious, for example due to measurement error in wages. I attempt to surmount this problem by using a variety of different estimators, all of which yield consistent evidence of full shifting.

Notes:

Print version record

March 1995.