Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden

Saez, Emmanuel; Schoefer, Benjamin; Seim, David

doi:10.1257/aer.20171937

Cited by 147 publications

(93 citation statements)

References 50 publications

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“…While prior empirical studies of labor market monopsony have reached similar conclusions, only a few have used quasi-experimental variation to estimate separation responses to firm-specific wage changes, and these studies focus on a narrow range of settings. 5 Moreover, the evidence for low-wage labor markets is particularly scarce and the empirical relevance of monopsony power in these markets remains a subject of debate. 6 Our results thus complement the extant literature and provide novel evidence that considerable wage-setting power exists in a setting characterized by low wages and high turnover.…”

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confidence: 99%

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Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Dubé¹,

Giuliano²,

Leonard

2019

American Economic Review

116

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We analyze how separations responded to arbitrary differences in own and peer wages at a large US retailer. Regression-discontinuity estimates imply large causal effects of own-wages on separations, and on quits in particular. However, this own-wage response could reflect comparisons either to market wages or to peer wages. Estimates using peer-wage discontinuities show large peer-wage effects and imply the own-wage separation response mostly reflects peer comparisons. The peer effect is driven by comparisons with higher-paid peers-suggesting concerns about fairness. Separations appear fairly insensitive when raises are similar across peers-suggesting search frictions and monopsony are relevant in this low-wage sector. (JEL D63, J31, J42, J62, L81)When making decisions about job mobility, do workers mainly compare their pay with the outside market? Or do they also make comparisons with the pay of coworkers in their own firm? If workers are very sensitive to wage differences across firms as in the standard competitive labor-market model, then employers have little scope to set wages. But even if a firm's wage-setting is not fully constrained by market competition, employers could still be constrained by employee concerns about relative pay within the firm. Such internal constraints could lead to wage compression or to measures that inhibit comparisons across coworkers-such as pay secrecy and outsourcing of jobs. Estimates of how employee turnover responds to external and internal wage comparisons are therefore central to understanding the wage-setting behavior and other employment practices of firms. Yet the endogeneity of wages in natural employment settings has made causal evidence hard to establish.In this paper, we analyze how job separations responded to arbitrary wage differences among sales employees at a large US retailer with hundreds of stores nationwide (henceforth "the firm"). Using quasi-experimental variation that resulted from a

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confidence: 99%

“…Section V presents additional falsification tests, and Section VI concludes. 5 Falch (2011) and Ransom and Sims (2010) both use plausibly exogenous wage variation in the market for teachers; they find separation elasticities of −3.5 and −1.8 respectively. Mas (2017) estimates an elasticity of −11 using quasi-experimental wage variation for city managers.…”

mentioning

confidence: 99%

Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Dubé¹,

Giuliano²,

Leonard

2019

American Economic Review

116

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“…Panel B: Broad labour underutilisation: % of inactive, unemployed or involuntary part-timers (15-64) in population, excl. youth (15)(16)(17)(18)(19)(20)(21)(22)(23)(24)(25)(26)(27)(28)(29) in education and not in employment. Data refer to 2014 for Japan and 2015 for Chile.…”

Section: Employment Is Low Particularly Among Low-skilled Youth Andmentioning

confidence: 99%

Assessing recent reforms and policy directions in France

Carcillo¹,

Goujard²,

Hijzen³

et al. 2019

OECD Social, Employment and Migration Working Papers

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“…These papers primarily study shocks that likely affect the employer-employee surplus, such as demand shocks or geographic variation, or they take a structural approach. In Sweden and Norway, respectively, Saez, Schoefer & Seim (2019) and Ku, Schoenberg & Schreiner (2020) find evidence that permanent tax policy changes affect firm rent sharing with workers.…”

Section: Introductionmentioning

confidence: 99%

Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms

Howell¹,

Brown²

2020

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available. JEL Classification:G32, G35, J31, J41

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Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden

Cited by 147 publications

References 50 publications

Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior

Assessing recent reforms and policy directions in France

Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms

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