A Reappraisal of the Incidence of Employer Contributions to Social Security in Japan

Abstract

This paper reappraises Tachibanaki and Yokoyama (2008)-an empirical analysis indicating no apparent backward shifting of employer social insurance contributions-by modifying their empirical strategy. First, we control for a spurious positive correlation between wages and employers' contribution rates by trend variables. Second, we utilize a cross-sectional variation in the contribution rate of workers' compensation insurance. Third, we exclude two industries from our sample to remove sampling errors in wages.Our results indicate that the social insurance burden shifts back onto employees to some extent, contrary to Tachibanaki and Yokoyama (2008). Our finding is consistent with other existing studies.j ere_494 427..441 JEL Classification Numbers: H55, H22, J38.

The Labour Market Effects of Increases in Social Insurance Premium: Evidence from Japan

“…The final strand of the related literature includes studies focusing on the discussion of who ultimately bears the costs of insurance contributions: employers or employees. These studies yield a wide variety of conclusions on the incidence of insurance premium burdens and who bears them, because the countries, objects, and data sources differ for researchers in different countries (Hamermesh, ; Holmlund, ; Gruber, ; Anderson and Meyer, ; Komamura and Yamada, ; Sakai, ; Sakai and Kazekami, ; Hamaaki and Iwamoto, ; Tachibanaki and Yokoyama, ; Iwamoto and Hamaaki, ; Kugler and Kugler, ; Hamaaki, ; Müller and Neumann, ). The results are mixed, as pointed out in the meta‐analysis by Melguizo and González‐Páramo ().…”

How Do Japanese Health Insurance Societies Finance Their Contributions to the Health Service Systems for the Elderly?*

“…For instance, Tachibanaki and Yokoyama (2008) argued that the increase in social security premiums for health insurance, employee's pension insurance and unemployment insurance have not depressed employees' wages using industry-based aggregate data. Hamaaki and Iwamoto (2010) criticized Tachibanaki and Yokoyama (2008) by suggesting their results suffered from a downward bias in that they omitted the upper trend in wages and found at least some shift in the social insurance burden on wages using long-run time-series data. In the short run (as in our study), however, it is very difficult to separate the change in wages caused by cost-shifting from the change in wages caused by broader macroeconomic trends or temporary shocks to the national economy.…”

Social insurance and earnings management: Too rich to be good

“…Scholars almost agree that the social insurance contributions burden increases the labor cost of firms, so firms have the incentive to pass on this cost to their employees. Hamaaki and Iwamoto ( 2010 ) show that Japanese firms pass on the social insurance contributions burden to their employees. However, there is still controversy about how firms transfer this labor cost, and the related research is mainly tested from the perspective of wage and employment scale.…”