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Visibility of social security contributions and employment

Author

Listed:
  • Iñigo Iturbe-Ormaetxe Kortajarene

    (Universidad de Alicante)

Abstract
Social security contributions in most countries are split between employers and employees. According to standard incidence analysis, social security contributions affect employment negatively, but it is irrelevant how they are divided between employers and employees. This paper considers the possibility that: (i) workers perceive a linkage between current contributions and future benefits and, (ii) they discount employers contributions more heavily, as they are less “visible”. Under these assumptions, I find that employer contributions have a stronger (negative) effect on employment than employee contributions. Furthermore, a change in how contributions are divided that reduces the share of employers is beneficial for employment. Finally, making employers contributions more visible to workers also has a positive effect on employment.

Suggested Citation

  • Iñigo Iturbe-Ormaetxe Kortajarene, 2011. "Visibility of social security contributions and employment," Working Papers. Serie AD 2011-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2011-16
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-16.pdf
    File Function: Fisrt version / Primera version, 2011
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Make social security contributions more visible
      by Economic Logician in Economic Logic on 2011-08-31 19:02:00

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    More about this item

    Keywords

    Payroll tax; social security; tax incidence; tax visibility;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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