NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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David G. Seim

Universitetsvägen 10 A, 106 91 Stockholm
Stockholm University

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Institutional Affiliation: Stockholm University

NBER Working Papers and Publications

October 2019Hysteresis from Employer Subsidies
with Emmanuel Saez, Benjamin Schoefer: w26391
This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. First, we document that while active, the reform raised youth employment among the treated workers. The long-run effects are twice as large as the medium-run effects and likely driven by labor demand (as workers' take-home wages did not respond). Second, we document novel labor-demand-driven "hysteresis" from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Two years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresi...
October 2017Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden
with Emmanuel Saez, Benjamin Schoefer: w23976
This paper uses administrative data to analyze a large and long-lasting employer payroll tax rate cut from 31% down to 15% for young workers (aged 26 or less) in Sweden. We find a zero effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, even in the medium run (after six years). Simple graphical cohort analysis shows compelling positive effects on the employment rate of the treated young workers, of about 2-3 percentage points, which arise primarily from fewer separations (rather than more hiring). These employment effects are larger in places with initially higher youth unemployment rates. We also analyze the firm-level effects of the tax cut. We sort firms by the size of the tax windfall and trace out graphically the time series of firms' out...

Published: Emmanuel Saez & Benjamin Schoefer & David Seim, 2019. "Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden," American Economic Review, vol 109(5), pages 1717-1763.

 
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