Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?

Antoine Bozio (1, 2) , Thomas Breda (1, 2) , Julien Grenet (1, 2)

1 PSE - Paris School of Economics
2 PJSE - Paris Jourdan Sciences Economiques

We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find a limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.

Mots clés: Tax- Benefit Linkage; Social Security Contributions; Tax Incidence; Payroll Tax

Domaines: Economies et finances

Antoine Bozio, Thomas Breda, Julien Grenet. Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions?. 2020. ⟨halshs-02191315v2⟩