Public economics

Finance

Accounting

Archaeology

Payroll

Mathematics

Windfall gain

History

Macroeconomics

Labour economics

Tax credit

Economics

Income tax

Geometry

Payroll tax

Monetary economics

Capital (architecture)

Point (geometry)

Market economy

Percentage point

American Economic Review

This paper uses administrative data to analyze a large employer-borne payroll tax rate cut for young workers in Sweden. We find no effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, and a 2–3 percentage point increase in youth employment. Firms employing many young workers receive a larger tax windfall and expand right after the reform: employment, capital, sales, and profits increase. These effects appear stronger in credit-constrained firms. Youth-intensive firms also increase the wages of all their workers collectively, young as well as old, consistent with rent sharing of the tax windfall. (JEL H25, H32, J13, J23, J31, M51)

Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden