Floris Zoutman, NHH Nowegian School of Economics

Estimating Both Supply and Demand Elasticities Using Variation in the Payroll Tax Rate

Abstract

Zoutman, Gavrilova and Hopland (2018) develop a method that allows one to estimate structurual demand and supply elasticities using variation in a single tax rate. In this paper, we apply this methodology to estimate labor supply and demand elasticities using variation in the payroll tax. We consider two applications. First, we use reduced-form estimates from the literature on payroll taxation to retrospectively estimate structural labor demand and supply elasticities. Second, we exploit quasi-experimental variation in the payroll tax in Norway to estimate labor demand and supply elasticities, relying on data from a panel of the universe of manufacturing plants.

Floris Zoutman is an Assistant Professor in public economics with a PhD from the Erasmus University in Rotterdam from 2014. His research interests include optimal taxation, political competition, and social insurance.