Tuomas Matikka

I am a Senior Researcher at VATT Institute for Economic Research in Helsinki, Finland.

My research is focused on empirical public economics and labor economics, with a particular focus on behavioral responses to income taxes and social benefits.

Contact information:
Email: tuomas.matikka(at)vatt.fi (or matikka.tuomas(at)gmail.com)
Phone: +358 295 519 461

Other affiliations: CESifo Institute (Munich, Germany)

You can download my CV here

Current Working Papers

Does mandating social insurance affect entrepreneurial activity?
[NBER WP] (with Youssef Benzarti and Jarkko Harju) 
This paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity. We use a unique discontinuity in Finland that allows certain entrepreneurs not to pay social insurance contributions on their income. Using rich firm- and owner-level administrative data, we find that relaxing the social insurance mandate leads entrepreneurs to significantly reduce their contributions, and they channel the saved cash into their firms. While young firms use the saved cash to increase business activity, older ones use it to improve their net lending position by purchasing stocks. Our results imply that the social insurance mandate is binding and its efficiency cost is heterogeneous, as it affects the business activity of young firms but not mature ones.

Does sending letters increase the take-up of social benefits? Evidence from a new benefit program [paper] (updated 02/2019) (with Tuuli Paukkeri)
The effectiveness of transfer programs in reducing poverty and inequality can be significantly reduced if eligible individuals fail to apply for them. This paper shows that benefit take-up can be influenced by sending targeted letters to the eligible population. We exploit the implementation of the guarantee pension program in Finland, which offered a monthly top-up benefit to low-income pensioners. The Social Insurance Institution sent information on the benefit together with application forms to a portion of the eligible population a month before implementation. We find clear evidence that this simple and inexpensive mailing increased take-up and prompted pensioners to apply sooner.

Discrete earnings responses to tax incentives: empirical evidence and implications
[new version 01/2019 ]  (with Tuomas Kosonen)
Winner of the IIPF Peggy and Richard Musgrave Prize, 2017
We study the consequences of discrete rather than continuous earnings choice sets on individual responses to income taxes. In our empirical application, we utilize an income notch created by the study subsidy system for higher education students in Finland and a reform that shifted out the location of this notch. We find that the reform, which changed the income tax schedule by increasing the location of the notch from 9,000 euros to 12,000 euros, affected the income distribution from earnings of about 2,000 euros onward. Because the tax schedule did not change around these lower incomes, the wide-ranging response to the reform constitutes a puzzle from a standard labor supply model point of view. We develop further results, theoretical arguments and a simulation model that all suggest that the shifting of the distribution can only be described with discrete earnings choices being part of the explanation. Moreover, we discuss the welfare implications of discrete earnings choices, and find that welfare losses can be greater than previously estimated if the underlying behavior is constrained by discrete earnings choices but they are thought to be stemming from continuous earnings choices.  

Peer-Reviewed Publications

Compliance Costs vs. Tax Incentives: Why Do Entrepreneurs Respond to Size-based Regulations? Accepted for publication, Journal of Public Economics, 2019 (with Jarkko Harju and Timo Rauhanen)

How Do Small Firms Respond to Tax Schedule Discontinuities? Evidence from South African Tax Registers Accepted for publication, International Tax and Public Finance, 2018 (with Wian Boonzaaier, Jarkko Harju and Jukka Pirttilä)

The Elasticity of Taxable Income and Income-Shifting Between Tax Bases: What Is "Real" and What Is Not?
International Tax and Public Finance 23(4): 640-669, 2016. (with Jarkko Harju)
Working paper version with additional results here

Business Owners and Income-Shifting: Evidence from Finland
Small Business Economics 46(1)
: 115-136, 2016. (with Jarkko Harju)

Nordic Tax Journal 1(1): 100-107, 2017. (with Kaisa Kotakorpi)
Winner of the Nordic Tax Journal Article Prize, 2018

Work In Progress

Small firms and corporate taxes: effects on (real) economic outcomes
(with Jarkko Harju, Aliisa Koivisto and Li Liu)

Once or twice a month? The impact of payment frequency on consumption patterns (with Jani-Petri Laamanen and Tuuli Paukkeri)

The impact of maternal leave policies on long-term labor market outcomes
(with Kristiina Huttunen and Tuomas Kosonen)

Social benefit thresholds and labor supply
(with Tomi Kyyrä and Jarkko Harju)

Recent Policy Reports in Finnish

Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja  25/2019
(with Jarkko Harju, Ohto Kanninen, Hannu Karhunen, Tuomas Kosonen and Jouko Verho)

Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja  72/2018
(with Jarkko Harju, Tomi Kyyrä, Olli Kärkkäinen and Lauri Ojala)

Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja  45/2018
(with Tomi Kyyrä and Hanna Pesola)

Tuloverotuksen vaikutus työn tarjontaan
Valtioneuvoston selvitys- ja tutkimustoiminnan julkaisusarja  5/2016
(with Jarkko Harju and Tuomas Kosonen)

Recent research activities

Entrepreneurs & social insurance contributions

Sending letters & take-up of social benefits [paper]

Discrete earnings responses to tax incentives