TY  - JOUR
AU  - Gruber,Jonathan
TI  - The Incidence of Payroll Taxation: Evidence from Chile
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5053
PY  - 1995
Y2  - March 1995
UR  - http://www.nber.org/papers/w5053
L1  - http://www.nber.org/papers/w5053.pdf
N1  - Author contact info:
Jonathan Gruber
MIT Department of Economics
E52-355
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/253-8892
Fax: 617/253-1330
E-Mail: gruberj@mit.edu
AB  - Despite the growing reliance on payroll taxation worldwide, there is limited evidence on the incidence of payroll taxes.  I provide new evidence by examining the experience of Chile before and after the privatization of its Social Security system.  This policy change led to a sharp exogenous reduction in the payroll tax burden on Chilean firms; the average payroll tax rate in my sample fell from 30% to 5% over this six year period.  I use data from a census of manufacturing firms, which contains information on firm specific tax payments and average wages.  I find strong evidence that the incidence of payroll taxation was fully on wages, with no effect on employment.  A potential weakness with this approach is that some of the variation in firm-specific tax rates may be spurious, for example due to measurement error in wages.  I attempt to surmount this problem by using a variety of different estimators, all of which yield consistent evidence of full shifting.
ER  -