Employment and Wage Effects of Social Security Financing — An Empirical Analysis of the West German Experience and Some Policy Simulations [chapter]

Viktor Steiner
2004 Labor Markets and Social Security  
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more » ... von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. for helpful discussions and suggestions and Bruno Kaltenborn for his help with the data preparation. Of course, any remaining errors are my own. Abstract This paper follows up recent work on the relationship between (un-)employment and wage effects of social security financing undertaken by the OECD Jobs Study. Based on a simple macroeconometric model of the labour market, I investigate whether the peculiar OECD results for Germany on the incidence of social security contributions and taxes also hold up within a somewhat different model. The study also provides some policy simulations to answer the topical question whether increasing indirect taxes to finance a reduction of the contribution rates to social security levied on employees and employers in Germany. The main result of the paper is that there is in fact a positive short-run employment effect of a revenue neutral switch of financing social security expenditures by increasing indirect taxes and reducing employers' contribution rates, but in the longer-term only modest effects remain due to higher wages. JEL classification: E24, H55, J38
doi:10.1007/978-3-540-24780-7_13 fatcat:kekzxpkz4fdo7bu2iqu6x5qu4m