Emmanuel Saez, Benjamin Schoefer, David Seim, 22 November 2017

Cuts to the employer portion of payroll taxes are often discussed as a policy lever to reduce labour costs for firms. This column examines the effects of a Swedish experiment which dramatically cut employer payroll taxes for young workers between 2007 and 2015. The tax cut reduced youth unemployment by 2-3 percentage points, without any differential increase in wages of young workers. Firms used the tax windfall to expand employment and business activity, and firms with larger tax windfalls raised wages for workers – both young and old – collectively.

Youssef Benzarti, Dorian Carloni, 13 November 2017

In the wake of the Global Crisis, some governments sought to stimulate demand through VAT cuts. This column assesses the success of these measures by investigating who benefited from a VAT cut on sit-down restaurant meals in France. The results show that restaurant owners captured the lions’ share of the tax cut, while employees and consumers benefited substantially less. Further, following subsequent tax increases, restaurant owners increased their prices by four to five times more than they had decreased their prices following the original cut.

Alexander Wagner, Richard Zeckhauser, Alexandre Ziegler, 24 February 2017

The election of Donald Trump as president of the United States will profoundly affect the US and world economies. This column argues that the stock market has already identified winners and losers among companies and industries. It finds, for example, that investors expect US firms paying high taxes to be relative winners from the Trump presidency, and firms with substantial foreign involvement to be relative losers.   

Events