Research
WORKING PAPERS
[New draft!] Firms Matter: Understanding the Effects of Payroll Tax Reductions for Minimum Wage Workers
Under review
The paper previously circulated under the title "Payroll Tax Reductions for Minimum Wage Workers: Relative Labor Cost or Cash Windfall Effects?", CESifo Working Paper No.11076
Abstract: This paper studies how firms adjust to targeted reductions in payroll taxes for minimum-wage workers. Leveraging reforms in France in the mid-1990s that reduced minimum labor costs by up to 10 percent, I combine linked employer–employee data and balance sheets data to analyze both market-level and firm-level responses. Aggregate minimum-wage employment increases substantially, with an own-cost elasticity of -2. This effect is entirely driven by firms for which the reform barely affected total labor costs. Firms most exposed to the tax cut---those receiving the largest mechanical reduction in labor costs---do not expand minimum-wage employment. Instead, they experience temporary increases in profits and short-run employment growth, particularly when financially constrained. These findings contradict the predictions of the standard competitive model and suggest that initial input composition and cash constraints mediate labor demand responses. Targeted payroll tax cuts therefore operate not only through relative factor price changes, but also through firm-level balance sheet effects.
Presented at PSE Labor & public economics seminar (2019), IIPF Annual Conference (Glasgow 2019), Paris Taxation Seminar (2020), World Congress of the Econometric Society (2020), EEA Annual Congress (2020), Online Public Finance Seminar (2021), PSE Applied seminar (2021), LMU Public economics seminar (2021), ZEW Public Finance Conference (2021), LAGV Public Economics Conference (Marseille 2021), EALE (2021), ETH-KOF seminar (2021), ASSA Annual Meeting (2022), University of Stavanger (2022), University of Exeter (2022), Universita degli Studi di Milano - la Statale (2022), VATT Institute for Economic Research (2022), OFCE Seminar (2022), Annual Meeting of the Norwegian Association of Economists (Stavanger 2022), Oslo Macro Group (2023), LISIT (2023), Wages Employment and Inequality workshop (Helsinki 2023), CESifo Area Conference on Public Economics (2024), University of Oslo (2025), Nordic Public Policy Symposium (2025).
This paper was a finalist for the Distinguished CESifo Young affiliate award at the 2024 CESifo Area Conference on Public Economics.
WORK IN PROGRESS
Salience Effects of a French Reduction in Labor Costs, with Antoine Bozio and Clément Malgouyres
Draft/slides available upon request
Abstract: The efficiency of policies such as tax cuts is undermined if complexity, frictions or behavioral biases make incentives inoperative. In this paper, we question the assumption that firms are unitary and rational decision-makers and we investigate the importance of salience in the taxation of firms. We take advantage of a reform that affected the salience of a tax mechanism that reduced labor costs of workers paid below a certain threshold. The original policy was inefficient in fostering employment; one possible explanation was its lack of salience. A particularity of this policy (both before and after the reform) is a large discontinuity in labor costs around a wage threshold. Using linked employer- employee data on the universe of firms, we find a large increase in bunching at this threshold, consistent with an effect of salience. The excess mass is bigger in small firms and in firms with a large share of workers around the threshold. We interpret this as evidence that flexibility and mis-optimization costs can matter more than sophistication.
Presented at EU Tax Observatory Workshop on the Economics of Taxation (Barcelona 2023), EALE (Bergen 2024), Skatteforum (Stavanger 2024), Annual Meeting of the Norwegian Association of Economists (Trondheim 2024), LAGV Public Economics Conference (Marseille 2025).
The Effects of Taxing Overtime Hours: Quasi-Experimental Evidence from France, with Santiago Garriga, Simon Löwe and Dario Tortarolo
Draft/slides available upon request
Description: We exploit a series of changes in taxation of overtime hours in France to identify the elasticities of the demand and supply of overtime work. Using both exhaustive linked employer-employee data, administrative data on payroll taxes and survey data on paid vs unpaid overtime hours, we examine the effects of firm- and employee-side taxation on overtime hours, firm-level employment and the probability for firms of declaring or not overtime hours. While overtime work can have potentially large consequences on overall employment and on firms’ capacity to react to shocks, it remains unclear what drives labor demand and supply of overtime. This research project explores these channels.
Presented at EALE (Prague 2023).
Wage Incidence: Evidence from a Sectoral Tax in France, with Malka Guillot
Presented by Malka Guillot at LAGV (Marseille 2024) and EEA (Rotterdam 2024).
Norwegian Firms and Covid Transfers (with Torfinn Harding and Fuchen Zhang)
Presented at the Annual Meeting of the Norwegian Association of Economists (Bergen 2025).
Presented by Torfinn Harding at Statistics Norway.