We study the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, we examine the heterogeneous impact of the policy. Employment increases most at low-productivity firms oﬀering low-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms oﬀering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.
Anikó is a Research Associate at the IFS and a senior researcher at the Institute of Economics, Centre for Economic and Regional Studies in Budapest.
Research Fellow University College London
Attila is an IFS Research Fellow, an Associate Professor of Economics at the University College London and Adjust Professor at the University of Oslo.
Research Associate World Bank
Daniel is an economist at the World Bank. His research covers topics in public finance, including social insurance, taxation, and inequality.
Working Paper details
- Institute for Fiscal Studies
Branyiczki, R et al. (2022). Firm heterogeneity and the impact of payroll taxes. 22/49. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/firm-heterogeneity-and-impact-payroll-taxes (accessed: 23 February 2024).
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