Research

Highlights:

• • Exploits a quasi-experimental tax cut policy to micro firms using employer–employee matched admin data 

  • Triple-differences as strategy to identify causal effects for target firms while accounting for differential firm growth trends

  • Firm behaviour barely responded to this sudden financial windfall gain 

  • Implies a full payroll tax incidence on employers, and no rent-sharing activity

Abstract:  This paper empirically synthesises payroll tax incidence and rent sharing in small entrant firms in a unified framework. We exploit a quasi-experimental payroll tax cut reform in Belgium. This reform generated a temporary windfall gain at employers' disposal for firms that just hired their first employees shortly beforehand. With employer–employee matched administrative data, we employ triple differences as our identification strategy to document dynamic effects on treated firms over five years. At the employee level, wage rates, hours worked, and gross earnings remained unaffected. At the firm level, the reform encouraged the subsidy take-up, but did not improve business dynamics (survival, employment, or employee turnover). Cumulatively, employers saved €3,000 labour costs for one full-time equivalence first employee. Our findings suggest a full payroll tax incidence on employers with an absence of rent sharing in the context of a temporary tax cut. (JEL codes: H22, H25, H32, J21, J31, M51)

Keywords: payroll tax cut; windfall gain; payroll tax incidence; small firms; wages; rent sharing

Highlights:

• • First paper to study payroll tax incidence directly at firms' entry and thereafter for the first worker with employer--employee matched admin data 

  • Workers' incidence share: 1/3 (wage rate) or 2/3 (total earnings) 

  • Designs a new identification strategy (treatment effect bounding) based on micro theory to deal with non-random sample selection

Abstract:  This paper studies payroll tax incidence at firm entry, a setting rarely examined in the literature. We exploit a 2016 Belgian reform that permanently exempted new employers from payroll taxes for their first employee, sharply reducing hiring costs and encouraging entry of lower-productivity firms. Using administrative data and a cohort-based difference-in-differences design, we find that the reform reduced payroll taxes while raising both wage rates and working time. To interpret these results, we develop a unified model linking firm entry, firm productivity, and tax incidence. We then propose a theory-guided heuristic trimming method to address compositional changes of firm entry. The yielded estimates remain close to the baseline results, suggesting productivity differences matter little for entry incidence. Employees capture about one-third of the payroll tax relief on a per-FTE basis, echoing recent evidence of partial pass-through. Employees’ incidence share nearly doubles once longer working hours are considered, highlighting an under-explored adjustment margin in incidence analyses.  (JEL codes: D20, H22, H55, J31, J38, J23)  

Keywords: Payroll tax; Tax incidence; Firm entry; Wage; Sample trimming 

Highlights:

• • Evidence for new firms entering the labour market as employers with admin data 

  • Lowering the labour cost encouraged the entry of lower-quality firms and disincentivised subsequent growth and performance

  • Extend neoclassical theory implications on entrepreneurship into the labour market setting

Abstract:  This paper examines the impact of a hiring subsidy for start-ups on their performance. We exploit an unexpected policy reform in Belgium that permanently exempted start-ups hiring their first employee from payroll taxes for that employee. Using comprehensive firm-level administrative data and a regression-discontinuity-in-time design (RDiT), we find that subsidized post-reform start-ups employed fewer workers and generated lower output, value added, and profits compared to pre-reform start-ups. However, post-reform start-ups were more likely to survive as employers. These effects emerged within the first year after hiring and remained stable over a medium time horizon of up to three years. Our findings indicate a compositional shift: the subsidy primarily attracted marginal start-ups that are less productive than inframarginal ones. These results extend the theoretical implications of standard neoclassical models of entrepreneurship into a labor market setting, predicting that lower employer entry costs attract less productive firms to enter the market. (JEL codes: H24; J23; J24; J38; M51)

Keywords: start-up; hiring subsidy; tax reduction; labor demand; small firms 

Highlights:

• • Exploits quasi-experimental variation of students' exposure to peer prejudice 

  • Negative effects on human capital (academic performance and mental health) of middle school students 

  • Combines internal migration setting with peer effects of discrimination 

Abstract:  We study how peer parental prejudice affects student outcomes in Chinese middle schools. Using nationally representative data and quasi-random classroom assignment, we construct a classroom-level prejudice index based on parents’ attitudes toward migrant students. A one standard deviation increase in the index reduces academic scores by 0.07 standard deviations. Local students show more misbehavior; migrants reduce study effort. Mental health effects are weaker but suggest reduced peer interaction and a hostile classroom climate. Effects are stronger in more diverse classrooms. Our findings highlight how family-transmitted prejudice shapes student development and underscore the importance of classroom peer context in education policy. (JEL codes: I21, J13, J15, O15, O18)

Keywords: secondary education; peer effect; academic achievement; internal migration; children development

Abstract:  This paper develops a framework for identifying treatment effects when a policy simultaneously alters both the incentive to participate and the outcome of interest—such as hiring decisions and wages in response to employment subsidies; or working decisions and wages in response to job trainings. This framework was inspired by my PhD project on a Belgian reform that subsidised first-time hiring, inducing entry by marginal firms yet meanwhile changing the wages they pay. Standard methods addressing selection-into-treatment concepts (like Heckman selection equations and local average treatment effects), or before-after comparisons (including simple DiD or RDD), cannot isolate effects at this shifting margin where treatment defines who is observed. I introduce marginality-weighted estimands that recover causal effects among policy-induced entrants, offering a policy-relevant alternative in settings with endogenous selection. This method can thus be applied widely to understanding the economic impacts of public programmes, especially in fields largely relying on reduced-form causal inference estimation (e.g. labour economics, development economics, health economics).  (JEL codes: C01, C10, J01, J08)

Keywords: programme evaluation; causal inference; reduced-form estimation; treatment effects; marginal decision-maker

Abstract:  Most firms operate without paid employees nowadays, yet the decision to hire the first worker is rarely modelled explicitly. This paper develops a threshold framework in which employer formation depends jointly on productivity, wealth, and risk. Exploiting a payroll tax reform in Belgium that increased new employer formation, we show that subsidised new employers were less labour-productive, despite having higher sales prior to hiring. This pattern provides evidence that employer entry is shaped not only by productivity, but also by firm wealth and entrepreneurial risk, supporting our theoretical mechanism. (JEL codes: D21, D22, J23, L26)

Keywords: firm entry; entrepreneurship; firm productivity; new employer; hiring decision; uncertainty  

Highlights:

• • Desgin causal inference under non-random sample selection

  • Tightening partially identified bounded estimates like Lee (2009) and Manski--Horowitz to point estimates

  • Propensity score used as a ranking device

Abstract:  This paper proposes a trimming-based identification framework for settings with non-random sample selection. The method treats the propensity score as an ordinal ranking device—rather than a matching model—so identification relies only on its ordering, not on its cardinal correctness. I first estimate the direction and magnitude of excess entry or attrition implied by non-random selection. This estimated imbalance determines the trimming fraction applied to the ranked sample, removing units that violate common support. The procedure isolates inframarginal regions where responses are structurally stable, restoring sample balance without requiring a correctly specified propensity-score model. Under credible structural restrictions, the resulting bounds tighten sharply and often collapse to point identification, offering a path from partial to point estimands.   (JEL codes: C14, C21, C51)

Keywords: Partial identification; Non-random sample selection; Trimming; Causal inference; Monotonicity 

Abstract:  This paper investigates how elderly family members’ participation in social insurance programmes influences the labour outcomes of working-age employees in China. Building on theories of household risk sharing and social interactions, a model with exogenous pension transfers and home production predicts that higher pension coverage for the elderly raises employees’ wages and job quality by easing financial risks and enhancing human capital productivity. Using China Family Panel Studies (2010–2018), the analysis shows that greater pension coverage among the elderly increases younger workers’ wages and encourages more active, higher-risk labour market participation, particularly when parents are retired, in poor health, or co-reside with them. These findings highlight the intergenerational spillovers of social insurance and its role in improving labour market efficiency. (JEL codes: H31, J20, J30, O12)  

Keywords: Social insurance; Extended household; Labour supply; Wage; China Family Panel Studies (CFPS) 

Methodological discussions about RDD: I analytically show the (mostly neglected) inherent problems of the polynomial RDD estimands and propose alternative estimands.

This project models price structures explicitly within microeconomic theory, recognising prices as functions that embody firms’ business models rather than mere variables. Incorporating these structures alters partial- and general-equilibrium welfare outcomes compared with conventional market analyses.