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on Public Economics |
| By: | Aleman-Pericon, Christian (NYUAD); Mimani, Pranav (NYUAD); Santaeulalia-Llopis, Raul (NYUAD); Wasmer, Etienne (NYUAD and LISER) |
| Abstract: | This paper revisits the belief that the mix of employer and employee social security contributions is neutral for employment and equilibrium wages. We establish the conditions required for neutrality across competitive settings, institutional minimum wages, progressive taxation, and search-and-matching frictions. We show that statutory invariance breaks down due to an asymmetry in the tax wedge operating almost identically across all models. Tax neutrality is restricted to a knife-edge case that does not hold in modern labor markets. Statutory non-neutrality in the labor market is therefore relevant quantitatively because it arises as soon as marginal tax rates are above 20\%. This has implications for designing contemporary welfare and workfare policies. |
| Keywords: | labor taxes, tax incidence, employment, search models |
| JEL: | H22 J32 J38 J64 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18850 |
| By: | Hyejin Ku; Uta Schönberg; Ragnhild C. Schreiner |
| Abstract: | This paper provides new micro-level evidence on how labor taxation shapes firm behavior, exploiting an EU-mandated payroll tax reform in Norway. Combining administrative and survey data, we find that firms facing larger tax increases sharply cut employment but also increased R&D spending, implemented labor cost-saving innovations, and adopted more automation. While these responses led to improvements in labor and total factor productivity within the firm, the firm's labor share fell. These effects persisted even after the tax hike was unexpectedly reversed three years later, suggesting a lasting shift toward more capital-intensive production in response to higher labor costs. |
| Keywords: | payroll taxes, labor costs, firm behavior, technology adoption, inequality |
| JEL: | J23 J32 H25 H32 O31 O32 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26192 |
| By: | Brockmeyer, Anne; Garfias, Francisco; Suárez Serrato, Juan Carlos |
| Abstract: | Can the provision of public goods strengthen fiscal capacity and foster tax compliance in developing countries? We study this question using a large-scale randomized infrastructure investment in Mexico City and administrative property tax data. Despite substantial improvements in local amenities, property values, and economic conditions, we find no evidence that infrastructure investments increased tax compliance---even when the tax-benefit link was made salient. These null results hold across different measures, subgroups, and empirical strategies, and we can rule out even small causal effects. By precisely estimating the limits of reciprocity-based compliance, our findings refine the fiscal contract theory and challenge its applicability beyond narrow elites. Equipped with this evidence, policymakers can redirect efforts toward more effective approaches for strengthening state capacity, such as enforcement and administrative reform. |
| JEL: | H41 H71 O23 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19354 |
| By: | Baumgartner, Erick (Bocconi University); Corbi, Raphael (University of Sao Paulo); Narita, Renata (PUC-Rio) |
| Abstract: | How much employment can be generated by decreasing payroll taxes? We examine this question by exploring the staggered rollout of a large payroll tax reform in Brazil. Using administrative matched employer-employee data, we find an increase of 5 percent on employment due to both firm growth and firm entry, no impact on wages and a significant increase in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent with predictions from an oligopsony model. |
| Keywords: | payroll tax, employment, wages, profits, oligopsony |
| JEL: | H2 J3 J6 J42 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18838 |
| By: | Niemietz, Kristian |
| Abstract: | Wealth taxes have been tried many times. In the early 1990s, about half of Western Europe still had wealth taxes. In the meantime, all but three of these countries have given up on them, including, in some cases, under left-wing governments, and even the three remaining ones have scaled back their wealth taxes. Governments that abolished wealth taxes justified this by pointing to their high administrative and compliance costs, adverse behavioural responses (especially negative effects on investment) and limited revenue-raising potential. These are also the reasons why previous attempts to introduce wealth taxes in Britain were abandoned. This paper mostly draws on the work of economists who are broadly sympathetic to the idea of wealth taxes, as opposed to ideologically hostile critics. Even a lot of their sympathisers concede that wealth taxes have major drawbacks. Britain does not currently have a tax which meets the strict textbook definition of 'a wealth tax', but it does have several wealth-related taxes, which can be considered close-enough substitutes, and it already raises more revenue from such taxes than any other OECD economy. For its supporters, the wealth tax has become an all-purpose tool. They are trying to achieve too many different things, and often mutually incompatible things, with it. The 'wish list' of things that a wealth tax has been promised to finance is simply implausibly long, and then it is also supposed to do many things beyond raising revenue on top of that. Wealth inequality in the UK is not especially high, and it is not rising. The top 1% of the wealth distribution account for about 22% of the total wealth, which is less than the EU average and much less than it used to be for most of the 20th century. Wealth taxes have rarely raised more than 1% of GDP in revenue, with typical figures being much lower than that. Where wealth taxes have existed for long periods, revenue has often tended to decline over time. In recent years, empirical evidence on behavioural responses to wealth taxes has largely confirmed the suspicions of sceptics. Wealth taxes really do reduce and distort investment in a number of ways. None of these effects are catastrophic, but they keep adding up and they tend to get worse over time. There are vastly superior alternatives to wealth taxes, which are based on creating wealth rather than penalising it. In the 20th century, Britain had long periods of falling wealth inequality, which was not explained by the government expropriating the wealthy but simply by more people acquiring pension wealth and housing wealth. Britain could move to a pension system more like the Australian one, where people pay contributions into their own pension fund rather than to a state pension programme. In such a system, the vast majority of people have the opportunity to build up considerable amounts of wealth over time. Wealth inequality in Britain was at its lowest when housing was relatively affordable and home ownership rates were at peak levels. Britain needs a 'YIMBY' revolution to unleash a building boom. This would give millions of people the opportunity to build up housing wealth. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ieadps:342457 |
| By: | Hoang Ha Nguyen; Van Lam Do; Van Thang Ta |
| Abstract: | The article uses data on Vietnamese enterprises from 2010 to 2023 to assess theimpact of the Global Minimum Tax (GMT) on the FDI sector and domestic enterprises. The resultsshow that GMT has a negative and statistically significant e!ect on fixed asset investment, profits, and revenues of FDI firms, while domestic enterprises respond positively in the short term. Thesefindings imply that Vietnam needs to quickly adjust its FDI attraction strategy, shifting from taxincentives to improving institutional quality, infrastructure, and domestic capacity, while alsorefining tax policy to both secure budget revenues and maintain investor appeal in the newcontext. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:dpc:wpaper:0201 |
| By: | Ferriere, Axelle; Navarro, Gaston |
| Abstract: | We use a quantitative heterogeneous agent model with nominal rigidities and unemployment risk to analyze the effectiveness of several fiscal policies in stabilizing a demand-driven recession. The model delivers empirically realistic distributions of marginal propensities to consume (mpc) and labor participation elasticities (lpe) and matches the cross-sectional incidence of unemployment risk over the business cycle. We consider three fiscal stabilization packages: (i) a transfer to all low-income households, (ii) an increase in unemployment benefits to unemployed households, and (iii) an increase in labor tax credits to low-income working households. The labor tax credit is the most effective package to attenuate the recession, as it targets both high-mpc and high-lpe households and thus jointly stimulates labor and consumption. This result holds despite the recession resulting in higher unemployment risk. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19538 |
| By: | Angel De la Fuente |
| Abstract: | Building on the analysis initiated in a previous study, the Working Paper describes and assesses the new elements of the Government’s proposal to reform the SFA contained in the draft agreement sent to the Autonomous Communities several weeks ago. |
| Keywords: | Inequality, Public spending, Taxes, Budget, Spain, Macroeconomic Analysis, Regional Analysis Spain, Public Finance, Working Paper |
| JEL: | H71 H77 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:bbv:wpaper:2613 |
| By: | Dahis, Ricardo; Szerman, Christiane |
| Abstract: | Changes in political boundaries aimed at devolving power to local governments are common across many countries. We examine the economic impacts of government unit creation through splitting. Exploiting reforms that led to sharp increases in the number of municipalities in Brazil, we show that voluntary splitting enlarges the public sector, enhances public service delivery, and stimulates long-term economic activity in new local governments. These gains are not offset by losses elsewhere and are stronger in peripheral, remote, and underdeveloped areas neglected by parent governments. Higher fiscal revenues and decentralized decision-making contribute to the positive effects on local economic activity. |
| JEL: | D72 H41 H75 H76 H77 Q53 R51 |
| Date: | 2026–07–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128401 |