Employment effects of payroll taxes - An empirical test for Germany

Abstract

This study tests to what degree the incidence of payroll taxes in Germany is on employment and whether in consequence payroll taxes, in particular social insurance contributions, are the culprit behind the growing unemployment problem. Using industry level data for 18 years (1977-1994) a system of five dynamic factor demand equations is estimated. Various simulations indicate that the employment effects of payroll taxes are minimal.