How did firms respond to the payroll tax reduction for youths?

Author: Niklas Kaunitz, And
Dnr: 138/2015

Previous research in the Nordic context suggests that changes in payroll tax rates have small effects on employment and wages. The purpose of this project is to shed some light on this from a firm perspective, in the context of the Swedish payroll tax reduction for youths in 2007.

The payroll tax reduction for youths involved a substantial subsidy for firms which happened to be intense in the employment of young workers. We use the variation in the age composition of the firm prior to the change to examine how firms responded in terms of survival, profits, productivity and investment.