Employment Effects of Payroll Tax Subsidies

38 Pages Posted: 9 Aug 2018

See all articles by Matthias Collischon

Matthias Collischon

FAU Erlangen-Nürnberg

Kamila Cygan-Rehm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Regina T. Riphahn

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: June 20, 2018

Abstract

This paper exploits several reforms of wage subsidies in the framework of the German Minijob program to investigate substitution and complementarity relationships between subsidized and non-subsidized labor demand. We apply an instrumental variables approach and use administrative data on German establishments for the period 1999-2014. Particularly in small establishments (0-9 employees), subsidized Minijob employment comprises large shares of the work force, on average over 40 percent. For these establishments, robust evidence shows that increasing the subsidization of Minijob employment crowds out non-subsidized employment. Our results imply that Minijob employment in 2014 may have eliminated more than 0.5 million unsubsidized employment relationships just in small establishments.

Keywords: wage subsidy, Minijob, labor demand, substitution effect, crowding out effect, displacement effect, employment, payroll tax

JEL Classification: J210, J230, J380, C260

Suggested Citation

Collischon, Matthias and Cygan-Rehm, Kamila and Riphahn, Regina T., Employment Effects of Payroll Tax Subsidies (June 20, 2018). CESifo Working Paper Series No. 7111, Available at SSRN: https://ssrn.com/abstract=3229068 or http://dx.doi.org/10.2139/ssrn.3229068

Matthias Collischon

FAU Erlangen-Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

Kamila Cygan-Rehm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
DE Bavaria 91054
Germany

Regina T. Riphahn (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics ( email )

Lange Gasse 20
Nuernberg, D-90403
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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