Authors: Antoine Bozio, Thomas Breda et Julien Grenet
Abstract : We study the earnings responses to three large increases in employer social security contributions (SSCs) in France over the period 1976–2010. Using a difference-in- differences (DiD) estimation strategy, we find evidence of increased labour cost, i.e., the absence of full tax shifting to workers, at the individual level, within five to six years after reforms that increased SSCs with little or no tax-benefit linkage. Our DiD estimates point to limited shifting of SSCs to employees in the form of lower wages, with an estimated employer share of the tax burden between 55 percent and 88 percent. In contrast, we find evidence of full shifting of increases in employer SSCs in the case of strong and salient tax-benefit linkage. We interpret these results as providing compelling evidence that the tax-benefit linkage matters for incidence, and we discuss possible explanations for the non-standard result of long-term nom- inal incidence of SSCs at the individual level.