[Online] Renata Narita, PUC Rio

Paper: “Payroll Tax, Employment and Labor Market Concentration”

Abstract: How much employment can be generated by decreasing payroll taxes? We examine this question by exploring the staggered rollout of a large payroll tax reform in Brazil. Using administrative matched employer-employee data, we find an increase of 5 percent on employment due to both firm growth and firm entry, no impact on wages and an increase of 59 percent in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent. with predictions from an oligopsony model.