Abstract
We investigate business cycle dynamics of social security contributions (SSC), by far the largest labor tax distortion in the OECD. In most countries, we find a negative covariation of SSC tax burdens with levels and growth of GDP at business cycle frequencies and lower. In detrended data, a decline of GDP of 1% is associated with a 0.05-0.2 percentage point increase in the aggregate SSC burden, measured as a fraction of the wage bill. For most countries, average marginal SSC rates exceed, but track average rates. Changes in average SSC tax burdens are largely due to adjustments in statutory tax schedules rather than cyclical shifts in earnings distributions. Our findings are consistent with Esping-Andersen's (1990) typology of social welfare states. In some countries, SSC rates co-move with measures of the “labor wedge” (Chari et al. 2007, Brinca et al. 2016).
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
