Incidence and Behavioural Response to Social Security Contributions: An Analysis of Kink Points in France

We examine the impact of social security contributions in France using the methodology developed by Alvaredo et al. (De Econ, 2017. doi:10.1007/s10645-017-9294-7). This strategy allows us to infer the incidence of social security contributions from the discontinuities in income distributions caused by the inflection points in the social security contribution scale. Using administrative wage data for the period 1976–2010, we examine around 200 of these inflection points and find no evidence that they systematically induce a discontinuity in the distribution of gross wages. This allows us to reject the hypothesis that social security contributions place a burden on employees, at least locally around the inflection points. Furthermore, we utilise the significant variations in social security contribution rates between inflection points and from one year to the next to estimate the local impact of social security contributions for both employers and employees around these thresholds. We find that employer-paid social security contributions are passed on to employers, whilst employee-paid contributions are passed on to employees. These results are consistent with the fact that the economic impact of SSCs aligns with their legal impact, locally around the inflection points.