Jarkko Harju

VATT Institute for Economic Research
Arkadiankatu 7
P.O.Box 1279
00101, Helsinki

Institutional Affiliation: VATT Institute for Economic Research

NBER Working Papers and Publications

March 2019Does Mandating Social Insurance Affect Entrepreneurial Activity?
with Youssef Benzarti, Tuomas Matikka: w25651
This paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity. We use a unique discontinuity in Finland that allows certain entrepreneurs not to pay social insurance contributions on their income. Using rich administrative data, we find that relaxing the social insurance mandate leads entrepreneurs to significantly reduce their contributions, which they channel instead into their firms. While young firms use this windfall to increase business activity, older ones use it to improve their net lending position by purchasing stocks. Our results imply that the social insurance mandate is binding and its efficiency cost is heterogeneous.
September 2017What Goes Up May Not Come Down: Asymmetric Incidence of Value-Added Taxes
with Youssef Benzarti, Dorian Carloni, Tuomas Kosonen: w23849
This paper shows that prices respond more to increases than to decreases in Value-Added Taxes (VATs). First, using two plausibly exogenous VAT changes, we show that prices respond twice as much to VAT increases than to VAT decreases. Second, we show that this asymmetry results in higher equilibrium profits and markups. Third, we find that firms operating with low profit margins are more likely to respond asymmetrically to the VAT changes than firms operating with high profit margins. Fourth, this asymmetry persists several years after the VAT changes take place. Fifth, using all VAT changes in the European Union from 1996 to 2015, we find similar levels of asymmetry.
October 2012The Impact of Tax Incentives on the Economic Activity of Entrepreneurs
with Tuomas Kosonen: w18442
Based on existing evidence, we know little about how the taxation of small business owners affects their economic activity. This paper studies the effect of two Finnish tax reforms, in 1997 and 1998, on the effort decisions of the owners of small businesses utilizing both theoretical model and empirical data. The reforms reduced the income tax rates of small business owners and applied only to unincorporated firms, leaving corporations out. We use a difference-in-differences strategy to estimate the causal impact of tax incentives on the economic activity of small businesses. The results imply that lighter taxation leads to an increase in the turnover of firms that we interpret as an increase in effort exerted by their owners.
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